Hard work pays. You have worked up the ladder, and now your corporation is well-established and can generate great profits.
You have invested money, time, and efforts and hired employees with the right skill set to achieve your business objectives.
Unfortunately, due to socio-economic factors beyond your control, your business is now struggling.
You have lawsuits filed against your business, tax issues to handle, and perhaps some of your creditors are hounding you. The company’s board of directors has borrowed money to address an existing financial crisis or your finance manager has made a mistake.
Though the business is picking up, you’re running out of time. Or perhaps you’re facing some legal procedures that threaten the existence your company.
These are common occurrences in the business world. Though some of the factors influencing the profitability of your business are beyond your control, you can take some steps to keep your business running. You also dissolve it and start again.
For instance, you can seek professional advice and services of a tax lawyer if your main issue is related to tax. If you’re out of options, you can consider filing bankruptcy.
Well, bankruptcy isn’t such a good word for most businesses and people. However, it can be a powerful tool for corporations to reorganize their operations and financial obligations.
The procedure also allows companies to discharge debts and dissolve their operations.
A tax debt lawyer can help.
Issues related to tax are one of the major challenges facing all businesses. Depending on the type of the tax and how long the debt has been outstanding, you could discharge it in bankruptcy.
However, this should be your last option. There are alternatives that can allow to handle your debts and keep your business operational.
Offer in compromise.
This in agreement with the Internal Revenue Service to pay a lower amount than your company owes. Such agreements are a great option if your business can’t work out a good payment schedule.
Note that there is no guarantee your offer in compromise will be accepted.
Therefore, you require a professional and competent legal guidance to create a professional presentation to the Internal Revenue Service. Full documentary support is necessary to increase the chances of your offer getting accepted.
Another option is to make a lump sum payment to meet your financial obligations for below 50% of your tax debts.
Read also: How to Eliminate Debt in 8 Painless Steps
In case you’re incapable of making a lump sum payment to meet your debt repayment target, you can consider repaying these debts in installments. Just like the offer in compromise, there is no guarantee that the IRS will accept it.
Thus, you should get a lawyer who has been succeeding in handling such cases for your presentation to be accepted.
Either of these options can help you make significant savings and give your business stakeholders the confidence that your corporation will survive the crisis.
Is Chapter 11 Bankruptcy an option too?
For a corporate intending to file bankruptcy protection, your choices include chapter 11 bankruptcy, a reorganization, or liquidation or chapter 7 bankruptcy. If you intend to keep operating even after filing the bankruptcy, then, chapter 11 bankruptcy is a perfect option.
It’s worth noting that going bankrupt is usually a complex process and should be handled by a professional bankruptcy or tax debt lawyer. Prior to filing your bankruptcy, consult a popular attorney who has been handling chapter 11 bankruptcy cases successfully.
Every chapter 11 bankruptcy is unique. Your company may be in a situation that forces into an involuntary chapter 7 bankruptcy. Note that chapter 11 bankruptcy allows you to reorganize your corporation to exit the liquidation of the company assets.
The last option could be liquidating the company so that the highest value gets paid for the company assets.
No more harassment.
In bankruptcy protection, all collection activities are stopped. It also protects the corporation from all legal proceedings related to the company in accordance with the bankruptcy code’s provision of automatic provision.
Any form of automatic stay violation by creditors may subject them to heavy penalties. These violations include harassing phone calls and correspondences demanding debt repayment.
Time to implement effective strategies.
Once you file bankruptcy, you and your lawyer with the assistance of a professional financial analyst, will prepare the right documents and present a robust debt reorganization plan to a designated committee of your creditors.
Every creditor wants to be paid, and the chances are that most of your creditors will be flexible. However, it’s wise to eliminate all unproductive workers, unfavorable contracts, and eliminate all ineffective practices and strategies.
You can also consider closing stores as your lawyer negotiates new deals with unions and suppliers. Note that bankruptcy allows you to void all restrictive and burdensome leases. These leases can be redone on favorable terms and conditions.
Once you present a workable and reasonable plan for operations and marketing of the business, that’s good news. Your creditors may accept it even if it means that they will get lower payment than your actual financial obligations to them.
Liquidation: Chapter 7 Bankruptcy
Perhaps you have tried all other options, and nothing is working. Your corporation is handling several lawsuits, you’re really struggling to finance your daily operations, your workers are on strike demanding increased salaries and repayment of overdue salaries, and you’re struggling with other financial issues.
In case your corporation reaches the breaking point, your financial advisors and counsel may advise you to opt for a liquidation.
Once you file chapter 7 bankruptcy, a trustee will take control of the company’s operations. He or she will continue running the business for some time and oversee the process of collecting, marketing, and the sale of the company assets.
Your company may continue selling its shares on Nasdaq, New York Stock Exchange, or on Pink Sheets and OTCBB.
Keep in mind that in chapter 7 bankruptcy, all secured creditors such as banks are usually paid first, or their collateral is collected first. The company owners are paid next if anything remains.
Always seek legal advice in case your company is facing financial issues or even lawsuits that can have a significant impact on the viability of your corporation.
About The Author
Catherine Park is a connector with Caffeinated who help businesses find their audience online. She loves working in the ever-changing world of digital and is fascinated by the role content plays in today’s marketing.