Business is tough right now, especially small business. Sometimes it’s hard to know whether to keep trying or to throw in the towel. Here are three things we can examine to determine whether a business bankruptcy will work for your business or not.
How much of the business debt is secured?
How much of the debts is secured vs unsecured generally guides us in how much we can help the business. Business liens are tricky and can limit how the debts can be paid or reorganized. Some liens can be crammed down but others stick around unless certain conditions are met.
Is the debt tax related?
If you’re an employer and you haven’t been withholding taxes from your W-2 employees, you’ve got a problem. When you take that money you’re taking on the role of a fiduciary for that cash that belongs to your employee (and technically, Uncle Sam).
If you’ve propped up your business with your employees tax contributions you’ve exposed the corporate officers to severe penalties and made them personally responsible for the taxes not paid to the government.
The same can be said for sales tax money. If you’ve been propping your business up with unpaid sales tax liabilities, you’ve got some real trouble.
Are you paying debts to insiders?
If, in the last year, you’ve repaid relatives or decision makers on their liens against the business, these can be recovered by the trustee under a rule that limits what’s known as a preference.
You’ve got to be extremely careful when filing a business bankruptcy against an LLC. You might be opening the corporation and it’s directors and family members up to lawsuits to recover money for creditors.
If your business is struggling and you need to discuss your options, call the attorneys at Harmon and Gorove to see how we can help you solve your financial puzzle.