Does this mean the owner has no money? Or does this mean the owner is no longer making money? Or is it something else?
In: Economics
It depends. most of the time the owner is separate from the company so their personal belongings aren’t subject to the bankruptcy. In some cases an owner of a business won’t do this.
Example. You make cupcakes. You buy a little store, hire 2 people to help and sell cupcakes out of that store. You probably had to take out a loan to get that store, maybe cupcakes aren’t selling great and you can’t keep up on your employee’s paychecks. Eventually the business just isn’t making enough money and you can’t afford the electric bill (can’t keep the lights on) and close the business.
What about all that money you owe? Maybe a few months on utilities. Maybe rent/mortgage payments for the property, maybe the last paycheck for employees? Well you are on the hook for all of that, and can’t afford it so you declare bankruptcy. *you* couldn’t afford it so you just tell everyone “I don’t have the money to pay you” and all (well, most) of your debt is forgiven. You have to pay what you can but certain things you own are protected (your home almost always, often a car ect ect).
Now if you make cupcakes and decide to open a cupcake store you could make Cupcakes LLC or Cupcakes INC. Then the company you created would buy/rent the store, would pay your employees and bills. And if the company ran out of money and declared bankruptcy, your bank account is safe because you didn’t declare bankruptcy, the company did.
In the first example you own the ingredients, you own the store, you own the equipment. In the second example you own Cupcakes LLC, but Cupcakes LLC is what owns the ingredients/store/equipment.
All it really means is the the business is no longer able to service (pay) its debts with any real ease, so they are asking the courts to step in and help them deal with outstanding creditors.
The business could still have money, and the owner could still be gaining wealth, but the business itself may be struggling to pay its current or future debt obligations.
Businesses are usually under an LLC or “limited liability company” which is formed to separate the business itself from the owner financially. Meaning they have separate finances so if the business fails the owner does not usually pay anything out of pocket. Usually.
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