The pandemic era has brought a lot of businesses under the weather. This has led to many small businesses moving towards bankruptcy. As per several research magazines, it was predicted that almost 33% of small businesses in the United States ended up halting their operations permanently or with an uncertain future. Loan forgiveness grants from the government probably protected the 66% of other small business units that were also on the brink of shutting down probably.
Factors to consider while thinking of bankruptcy
The factors associated with businesses are far more complex and intriguing. Expert guidance is just a call away at 888-297-6203 especially if you are a Los Angeles, Dallas, TX operating business. Some common factors to be looked upon cautiously while making bankruptcy decisions can be listed as follows-
- Business structure
The business structure is an important aspect of consideration. The business structure identification deals with the identification of the debtors, investors, and creditors of a business. Debtors are lenders who have a lien on the business asset, investors are the ones who infuse capital into the business and can be liable for business losses fully (for a sole proprietor) or limited liability for other arrangements. Creditors are the ones who provided critical supplies, raw materials, and other ancillary products to allow for the smooth functioning of the business. The distribution of debt amongst the class of lenders is crucial to evaluate the right bankruptcy move.
- Is business viable or liquidating is wiser?
There are some businesses that have great potential of proving to be rewarding, it is just a question of a temporary stimulus. More so in the pandemic era, a good percentage of businesses needed a stimulus to regain sweeping profits. However, there can be businesses that are just adding up losses and make no sense to continue. It might be due to lack of expertise, mismanagement, or obsolete business idea, it is essential to have an unbiased assessment of whether the continuation of business is feasible or liquidating it.
Options and consequences of filing bankruptcy across different chapters
- A sole proprietor is the only business that can take advantage of chapter 13 as a sole proprietor files for bankruptcy in an individual capacity. The business assets and liabilities of a sole proprietor are weighed along with the personal assets and liabilities during the bankruptcy procedure. If a sole proprietor wants to continue his/her business, then Chapter 13 is the best alternative if eligible, else Chapter 7 is a pretty obvious choice. Know more about such smart tips and tricks by logging on to https://www.recoverylawgroup.com/bankruptcy/.
- Filing bankruptcy for a partnership creates different circumstances depending on the type of partner. A general partner might have to file individual bankruptcy in case the losses arising from the partnership are posing risk to his personal assets. A general partnership business puts the partner’s assets at risk and hence, the only way to prevent the same is by filing bankruptcy independently.
- Limited Partnerships have multiple partners that include partners who pursue unlimited liability and partners who prefer having a fixed commitment like the limited liability partners. In this case, the general partners are still liable for losses from their personal assets if the company exceeds losses or defaults on any payments.
Apart from Chapter 7 and Chapter 13, Chapter 11 can also prove very beneficial for businesses which are looking to keep the business running. Dial in 888-297-6203 to know more and seek best professional services for your business on your fingertips.