Should I Stay in Business Or Should I Go?

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The operators of a small business in distress have one very difficult decision to make: does it make more sense to stop running the business and protect the owners personally (possibly through an individual bankruptcy) or try to save the business and reorganize it?

At WM Law, we help small businesses reorganize through Chapter 11 bankruptcies, especially newer Subchapter V cases which make the process faster, less paperwork heavy, and streamlined. It’s not fair for a small 10-employee company to be subject to the same terms in a reorganization as an airline or national car manufacturer. So Subchapter V is a lifeline for businesses that meet the debt limits and other qualifications.

We know that every small business owner believes in themselves and their vision for their business. Otherwise, they wouldn’t invest their sweat equity, money, and time to build a company from the ground up. Businesses often lose money in their first year or years of operation, so it’s rarely an instant success. So how do we know when to end the business and when to try reorganizing?

First, we look to the past. We want to know how long the business has been running and what it’s been earning in the past. The total net numbers on tax returns aren’t as important as the ability to generate business and project future growth. The longer a company has been running, the more goodwill it’s likely built over time. On the other hand, a disastrous reputation with customers could mean it’s time to stop and try a new business in the future. After all, that’s what bankruptcy is often used for – a fresh start.

Next, we look to the future. What are projections looking like, assuming there’s not another global pandemic? In normal times, what would we see as earnings and expenses? If there would be money available for servicing debt, we can look to figure out what a plan might look like and which major creditors need to be addressed so we can try to get the buy-in of creditors for a vote on a plan.

Businesses don’t need to wait until they’re under the threat of lawsuits, defaulted loans, or other issues to seek the counsel of a good lawyer and discuss options. We can speak with businesses at any stage from formation to dissolution and in between. We take pride in helping small businesses thrive. After all, we are a small business too. Some small businesses can be saved and others cannot (or should not). Our expertise can help guide that decision.

If you operate a small business and worry that it needs some help to stay afloat or thrive, call our office so we can discuss options to negotiate with creditors, seek bankruptcy protection, or help protect individual owners and wind down businesses. For more information visit our website or call us at 913-422-0909. At W M LAW, we are Here to Help!

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Jeffrey L. Wagoner


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