Business Bankruptcy and Insolvency

DETERMINE IF THE BUSINESS IS INSOLVENT

When a business is in trouble the process of determining the best course of action is complicated and confusing. The business most often has suffered from a lack of administrative attention in addition to having cash flow problems. The accounting is often in disarray and the owners are operating on a day to day basis often without a plan. The first step is to determine if the business can be salvaged or is hopelessly insolvent. This is an exercise for the business owner. Without a business plan and some objective prospect for the situation to improve there is little chance things will get better. A business bankruptcy can help by restructuring secured and unsecured debt and can give the business a break from collection activity to try to reorganize.

CHALLENGES RUNNING BUSINESS

It is common for the business owner to make serious mistakes while trying to keep his business from failing. Using sales tax collections that should be remitted to the state. Using payroll taxes that are withheld from employees. These are just some of the challenges that need to be avoided especially since taking these extreme measures can result in personal liability for those who are in charge of the business. In most cases with a small business the owners are also directly affected by the financial woes of the company. Facing the potential for liability of personal guarantees of the business debt makes the decisions regarding the business more complicated for them and their attorneys.

PLAN TO FILE BANKRUPTCY IN ADVANCE FOR A BETTER SUCCESS

If a decision is made to seen bankruptcy relief and to try to revive or rehabilitate the business the management of the business will need to plan the filing well in advance. This to make sure they will not have problems with the use of the cash that is generated by the business, make sure that employees are paid and the checks clear and that vendors who are critical to the operation are dealt with appropriately. A business plan is critical to success since most often in the early stages of the case creditors are active and if unfriendly the bankruptcy court will want to know what the prospect of success will be for the business.

SHUT THE BUSINESS DOWN OR REORGANIZE

In many cases a decision is made to shut the small business down rather than try to reorganize it. The business plan plays a key role in that decision. The shutdown if done properly can be done in a way to minimize the potential problems for the management and owners while still insuring that the insolvent business meets its obligations to act properly and fairly towards the creditors. Proper planning is key here. At Broumas Law Group we have experience helping many different businesses with an orderly shutdown.

BUSINESS STRUCTURE EFFECTS BANKRUPTCY

The business structure also needs to be understood. A corporation or limited liability company will protect the business owner from many liabilities if he did not personally sign guarantees or do things that harm creditors once the business became insolvent. A review of the agreements with vendors will often help determine the risks for the business owner with respect to trade creditors. Of course most commercial lenders will have a guaranty of their debt. The person signing those guarantees will not be able to easily avoid responsibility for those debts. Sole proprietorships and partnerships unfortunately do not protect the owners and therefore in those cases the business and the individual owners are more vulnerable.

GET HELP FROM BUSINESS BANKRUPTCY ATTORNEY

There are many issues that need to be considered if you are running a distressed business. Our bankruptcy attorney at Broumas Law Group can explain each of those areas to you as well as advising which type of bankruptcy is right for your business. We can also help advise you if other options are better for your business.