Clients call me about filing for bankruptcy, and they own a small business. It may be a retail store, a restaurant, a trucking company, a temporary employment agency — you name it. The businesses vary, the nature of the problems vary, the business may be a success and other things are the problem, there is only one constant. I have never had a small business owner walk in and know all of the things I needed to know to help him sort out his options with respect to his debts. Never. Not once.
So, here is a list:
- Is the business a separate entity, i.e. corporation, LLC, partnership, sole proprietorship (d/b/a) or something else?
- Assuming that the business is a separate entity, what does it own?
- What creditors have liens against business assets and which assets do they have liens on?
- What debts does the business have and which of those are you also liable for?
- Is the business viable or does it need to be shut down?
- If it needs to be shut down, what is the best way to realize value from the remaining business assets and is any particular creditor entitled to that value?
- Which creditors need to be paid first and why?
- How have you been paid for running the business?
- How have you contributed money to the business to keep it afloat (contributions to capital, loans)?
- How is the business taxed (does it file its own return, is its income reported on your return)?
- What business records exist and where are they?
This is certainly not an exhaustive list, and there may be a question or two that don’t apply to every scenario (especially to a scenario where the business is a viable concern). However, these are all things that every business owner really should know.
I intend to flesh out this list over the next few weeks. So, check back. I will create a new category for Business Bankruptcy to make additional posts easy to find.