When the economy plunged in the last recession, many people lost their jobs and could not find work. Some people took the opportunity to go into business own their own. With nothing to lose, many found their entrepreneurial spirit and set up websites and printed business cards to work as consultants in some fashion related to their set of skills and experiences. In the process, and as the economy slowly rebounded, some people did really well for themselves and others did not. Most success stories (more like survival stories) come from people who kept their debt and overhead low when going out on their own. The people who borrowed operating capital or sunk their life savings into a new venture did not always do as well as the others with less to lose if the new gig did not work out.
If a new business venture fails, there are several considerations to review when the owner needs to get out from under a failing business.
Thinking positively, as if anything is possible, consider whether the business is making money and if it can be saved with a capital injection. When cash flow is a problem and the bills need to be paid, an outside investor might be persuaded to add some money to the business in exchange for a percentage of profits. If the business makes money at different times of the year, such as a seasonally booming business, some outside money can make it easier to get through the slow times of year.
If business starts to slow down month after month with no sign of improvement it might be time to cut further losses and get out completely. In recent quarters, the economy has looked good and companies are hiring. Stepping away from a business venture to get back into a full time job is not a sign of weakness, rather think of the sign of strength and resolve a person must have to launch a small business venture in the first place.
When deciding to close the doors on a small business, there may be a few important business and legal decisions to make.
If a business closes with outstanding debts and liabilities there are a few options available, based on how the business was structured. A properly formed corporation may only have liability for assets in the business. Otherwise, a sole proprietor doing business on their own under a business name may be personally liable for any debts they incurred in the business. Additionally, some lenders putting money into small corporations require the borrower to sign with personal liability on money lent to the corporation. If creditors are going to go after your personal assets to get paid for debts of the business, a bankruptcy might protect you.
There are forms of bankruptcy relief and protection for individuals and small businesses. Once a bankruptcy petition is filed with the court the automatic stay provision kicks in and creditors must stop all collection activity and they cannot make contact with you during the period of time the bankruptcy case is ongoing. While a Chapter 7 bankruptcy can discharge the debts of the business, some people make too much money and do not qualify for Chapter 7. The alternative relief in Chapter 13 allows a reorganization (and partial discharge) of debts and provides for a repayment plan to the trustee while the individual gets back on their feet.
If you are interested in a review of a small business and its debts and want to know your options, Joseph Wrobel, Ltd. can help you with a free consultation so you understand all the available options.
Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.