Knowledge, Wise Counsel and the Proper Corporate Designation Can Help Safeguard Your Business Against Bankruptcy
For many of us, the images associated with personal or business bankruptcy typically involve terrifying images of losing everything. As bankruptcy is actually practiced, these snapshots of personal, professional and financial annihilation are a vast over simplification.
For small business owners, bankruptcy – in all its forms – seldom means a total loss. And, when properly handled by a skilled, experienced small business bankruptcy lawyer, the process can leave small business owners on fairly solid ground.
And, more often than not, bankruptcy can be prevented through proper planning.
Before your small concern starts growing in all directions, consult with a small business attorney to make sure your small business is structured properly, sufficiently insured and that your personal and business assets are separated. Perhaps the most important step in protecting business assets is structuring your business properly from the beginning. As grandma said, an ounce of prevention…
Consult an attorney who specializes in small business law to help determine whether you should set up your business as a general or limited partnership, sole proprietorship, limited liability company (LLC) or corporation. Each type of business makes you eligible for different types of bankruptcy filings.
If your company is in struggling, don’t hesitate to reach out to an attorney who specializes in small business law. If you’re taken precautions and still face the inevitability of filing for small business bankruptcy, there are ways to protect more of your assets, beginning with consulting a small business bankruptcy lawyer and filing under the correct chapter of the bankruptcy code.
The most well known type of bankruptcy filing is a Chapter 7 bankruptcy, in which a debtor discharges all, or a large percentage of, his or her debt, and owes creditors nothing more. The debtor’s assets – which exceed his or her exemptions – are sold to pay as much of the debt as possible. Then all the debt exceeding the amount of payment provided by the liquidation of assets, is discharged.
Small business debtors, including corporations, partnerships, and sole proprietorships, who prefer to remain in business and avoid liquidation, can file a petition under chapter 11 of the Bankruptcy Code, in which a debtor seeks an adjustment of his or her debts. This adjustment is accomplished either by reducing the amount of the debt or by extending the time the debtor has to repay it
Some sole proprietorships can even file under the “kinder/gentler” Chapter 13, which in many ways resembles a debt consolidation process more than the general impression of bankruptcy. Under Chapter 13, the debtor making monthly payments to the Trustee for a planned period of 3 to 5 years, and the Trustee managing payments to creditors over the plan period. At the end of the plan period, the debtor is discharged from any further obligation to the creditors paid under the plan.
These options are just a sampling of the options available to small businesses fighting bankruptcy. In come scenarios, debtors can convert non-protected assets to protected ones, which are protected against liquidation during a bankruptcy proceeding. The list continues, but the best way to fully understand how to protect you, your small business and any staff members under your wing, reach out to a small business bankruptcy lawyer today. Even if bankruptcy isn’t an immediate concern, know your options and protect yourself now.
SB is a financial writer who has profound knowledge on the contemporary financial world. He loves to contribute his articles to various financial communities, websites and blogs about various finance related issues which are prevailing in the market.