Tag: business bankruptcy

Business Bankruptcy Questions

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.  

Business after COVID-19

There will come a time when the coronavirus becomes a treatable disease.  Human patients will be recovered and we will have a treatment.  That’s just the inherent optimist in me.  However, many businesses will still be struggling long after the human toll has been realized.  These small businesses will have to make some tough decisions, including whether to continue in business or not.  I’m reminded of the Kenny Rogers song, “The Gambler.” In the song he sings about knowing when to hold ‘em and knowing when to fold ‘em. That’s what every struggling business owner has to consider.  

Here are some things to think about as you consider the future.

Do you even want to continue

The most important part of the small business is the owner of the business themselves.  They drive the business, create the products and supply the vision to make the business successful. If you’re drained and don’t feel like you can go on, now’s the time to look long and hard at whether you should continue operating the business.  

If you’re up for the challenge, there are more questions.

Can your business continue

Once this is over and we arrive at whatever “normal” is, we need to determine whether there is still a demand for the product or service you provide via your businesses. If there is a demand for your product, how long before that demand ramps up to the point that you can bring the business back to profitability.  How will you survive financially in the meantime? Because of these questions, you’ll need to look at the following instructions. . 

Reorganize your business to survive

COVID-19 has forced all of us to look at our situation and reevaluate how we operate, us included.  It causes us to look at what is and is not important and what is and isn’t essential. We have to take a tough look at our operations and ask ourselves:

Could the business continue with

  • More or less owners
  • fewer employees or restructured hours
  • Fewer locations or completely online

Take the time to reevaluate and embrace the opportunity to change the way things work, hopefully for the better

New debt 

Business loans are a part of the government’s recovery plan but one of the problems with this is the uncertainty about how the loans are to be repaid. You need to consider whether or not you’re able to float more debt.  Were you current on your debts or were you debt free?  Is borrowing essential to even keep the lights on.  If it is, then you have no other choice.

Winding down and moving on

Ending your business isn’t just an all or nothing choice.  If you fold the business you can still remain in the industry either as a manager or other type of operator.  It gives you the opportunity to re-enter the market in the event that the demand comes back without losing contacts in the industry.  

Challenges going forward

All of these issues are fluid and the situations are constantly changing.  We have helped hundreds of business owners wind down operations and get the piece of mind they need in order to move on with their lives.  If your business is failing or if it’s just overwhelming you, schedule an appointment with one of our award winning  bankruptcy attorneys to see if bankruptcy would be an option to help you move forward.