Even though no business owner ever wants to imagine shutting down the business that he or she worked so hard to create and build up, there may come a day when you, as the owner of a struggling company, have to decide that bankruptcy is the best and only way out of a very difficult situation. With the poor economy taking its toll on small businesses around the country, and even around the world, many business owners are facing bankruptcy as a result of falling profits and rising costs across the board.
If you find yourself in a situation in which your business has to file for bankruptcy because it simply cannot survive, continue reading for the steps that you'll need to take in order to make the process as easy and stress-free as possible.
Talk to Your Lawyer First
Before taking any steps whatsoever towards filing for bankruptcy, be sure to consult with your attorney, who can steer you in the right direction. Bankruptcy may not be the best option for you and your business after all, and your lawyer will be able to tell you why this may be the case. Your lawyer will also be able to tell you what type of bankruptcy you should file for, if this is the best course of action after all.
Choose the Type of Bankruptcy That You'll File
There are a variety of different types of bankruptcy that you can file. Choose the one that's right for your company and situation. Below are the two most often used types of bankruptcy for the average small business that provides goods and/or services to consumers: Chapter 7 and Chapter 11.
If your company really doesn't have a future because it simply doesn't have the funds to sustain itself and continue moving forward, the best route to take is a Chapter 7 bankruptcy, which is also known as liquidation. If you're a sole proprietor or a small business owner with a lot of debt, you'll need to sell off all of your assets in order to pay off the debts, and all of the remaining debt will be discharged.
If you plan to reorganize your business so that it can continue moving forward and hopefully do better in the future thanks to the changes you'll make, file for Chapter 11 bankruptcy. A court-appointed trustee will watch every move that you make from this point forward to make sure that you're following through on your reorganization plans.
Work with Your Lawyer to File the Necessary Paperwork
Work with your lawyer and your accountant to file all of the paperwork necessary to claim bankruptcy. These professionals will help you make sure the process goes as smoothly as possible.
By knowing what steps need to be taken when you file for bankruptcy, you can either close down or reorganize your business with grace. But before you make any decisions, you should definitely think about all of your options and determine what is really best for you and your company.
This post has been authored by Rachel Dawes, a freelance blogger who enjoys sharing her personal and work experiences online. She writes for Nishad Khan P.L., an expert bankruptcy attorney in Florida. Her hobbies include swimming and surfing.