Bankruptcy does not necessarily mean going out of business. Many companies, even major national and international brands such as General Motors, Marvel Entertainment, Six Flags, and Texaco, have used bankruptcy to reorganize their debt and other obligations. This reorganization allowed them to continue business operations – leaner and meaner, so to say.
This article lays out your business bankruptcy options and the consequences of filing business bankruptcy.
Chapter 11 Bankruptcy – Business Reorganization
A business intending to continue to operate, but with debt obligations, it cannot meet, can file Chapter 11 and reorganize its debt. A Chapter 11 bankruptcy begins with filing a petition and disclosure statement listing all assets and debts, including an income statement, and either a proposed plan for reorganization or the intention to file a plan. The owners of the business then become the “debtors in possession” and continue business operations while the Chapter 11 case is pending.
The reorganization plan will include all creditors’ claims organized by class, and each class will be treated separately. Some classes may have claims paid in full, others’ claims may be “impaired,” which means modified in some way, often paid less than what is owed. The creditors whose claims are impaired vote by ballot on the plan, the ballots are tallied, and the court holds a confirmation hearing to determine whether to confirm the plan.
The Chapter 11 Plan Must Be Feasible
Creditors want to be paid, and they often argue to the court that the proposed plan is not “feasible,” meaning, your business cannot hope to pay and perform under the plan considering its past performance, current finances, and anticipated future finances. This is a strong and persuasive argument, so if you are considering filing Chapter 11 be sure to craft a plan that will restore your financial situation and that your business can and will execute.
Once a plan is confirmed, the business operates as usual but pays creditors or performs its modified contractual obligations according to the confirmed plan. Once the plan is fully paid and performed, the business is discharged of liability for the unperformed or unpaid obligations.
Chapter 13 Bankruptcy – Sole Proprietor or Single Member LLC Reorganization
If you are a sole proprietor, a single-member LLC, or a married couple owning a business as a partnership or LLC, in most cases, you can file a personal Chapter 13 bankruptcy petition rather than Chapter 11, Why would you want to? Because tax law recognizes you and your business as one entity, not separate entities, you can use Chapter 13 to reorganize and discharge both personal and business debts and obligations.
Chapter 13 has many other advantages over Chapter 11. A personal Chapter 13 filing is a less onerous, more streamlined process and the filing fee is much less than Chapter 11. The attorney fee will be much less as well, as Chapter 13 has far fewer administrative requirements and requires fewer court appearances than Chapter 11.
How to File Chapter 13 and Reorganize Business and Personal Debt
If you decide to file Chapter 13, you (or you and your spouse) will meet with an attorney and craft a Chapter 13 petition and schedules, disclosing all income, expenses, assets, and debts, both personal and business. Once you take the online Credit Counseling course, your petition and schedules along with your certification of completion of the course will be filed. You will also file a proposed Chapter 13 repayment plan.
Using the Chapter 13 plan to Reorganize and Discharge Debt
Your attorney will also help you craft a three or five-year repayment plan that will allow you to do any or all of the following:
- Catch up with a mortgage, auto loan or lease, and business loan arrears;
- Catch up with any unpaid support obligations, such as alimony or child support;
- “Strip off” second mortgages, third mortgages, or HELOCs if the value of the property is less than the amount owed on the first mortgage;
- “Cramdown” any outstanding auto loans to current market value, and pay them off through the plan at prime plus 1-3%.
Regular Income is Required for Chapter 13 Bankruptcy
You must be able to show that you will have enough income to fund your plan and pay your ongoing expenses. If you do, the court will confirm your plan and in three or five years when you’ve completed your plan payments, you will be discharged of all unsecured debt and you will have reorganized your finances, both personal and business.
Chapter 13 for small business owners can achieve the same thing as Chapter 11, without the expense, time, and creditor oversight, but with the added benefit of dealing with personal debt and discharging any personal guarantees on business loans.
Chapter 7 Bankruptcy – Business Liquidation
If there is no reasonable possibility of continuing business operations even if some debt is reorganized, then Chapter 7 bankruptcy may be the only option. In a Chapter 7 business bankruptcy, the Trustee sells all business assets, if any, for the benefit of creditors of the business, and the business closes its books and ceases operations.
Chapter 7 bankruptcy is an opportunity to discharge all debt obligations of the business, which may include pensions, unperformed contract obligations, and business loans. The downside of Chapter 7 business bankruptcy is that if any individual personally guaranteed a business loan, that individual is still liable. The upside is that business owners walk away free of debt and contractual obligations, and may start another business in the same or a different field.
Chapter 7 for Sole Proprietors or Single-Member LLCs
If the business in question is a single-member LLC or a sole proprietorship, or a married couple owning it as an LLC or partnership, in most cases the business owner(s) could file a personal Chapter 7 case and have both personal and business debts discharged, inclusive of personal guarantees for business loans.
Business bankruptcy can get complicated, especially with the varying laws governing business structure state-to-state and the myriad ways a business can obtain financing. Before making any decisions, you should consult with a business bankruptcy attorney, who can provide you with an analysis of your options based upon your unique financial situation.
About the Author: Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy Philadelphia bankruptcy lawyer.
Need Money Now? Here Are 7 Ways You Can Gather Small Cash Fast
Running short on your monthly budget? Don’t worry, we have you covered.
This article will provide you with 7 of the best quick money options to get you out of your small cash binds. Obviously, when you need money and that too urgently, a small personal loan seems like the best way out. There are no obligations, other than repaying the loan, and also the money is completely legal.
In this article, you’ll find everything, including short-term personal loans and other money-making tricks to satiate your financial needs.
So, stay with us and keep reading to know more.
Online Installment Loans
As already mentioned short-term personal loans are one of the first thoughts to cross many minds when they need urgent money. However, most don’t really know where to look and what to look for in a short-term personal loan.
A rather convenient way to access these unsecured loans is going through an online money lending network. Of course, accessing lending options online reduces the paper-tussle and also speeds up the process.
Typically, taking out an installment loan from a private lender or a bank would require you to visit their corporate office. On the contrary, the online process eliminates all these hurdles.
All you need to do is fill in some basic details, choose the term and amount of the loan, and submit your application. It would usually take not more than 2-3 minutes. Plus, you stand a better chance of receiving an economical loan and that too without having to share your credit history or score.
Payday Loans For Ultra-Short Fund Needs
An alternative to installment loans is a payday loan. While installment loans, as the name suggests, are to be repaid in parts, payday loans are to be repaid one-time.
Notably, these loans are most suitable when you need a very small amount of money. For example, accessing a payday loan for a $500 loan is wise, but when you need more money, it would be better if you look for installment loans.
Although, many lenders offer payday loans up to $5000 or even more, you should only choose these loans when you know you can repay in time and without fail. The biggest issue with payday loans is the processing fee and comparatively high-interest rates against conventional loans.
Liquidating Your Assets
The aforementioned loans are mostly for those who do not have any assets to liquidate or mortgage against. Of course, when you have no savings or investments, you can presume to have no backup. And you’re left with no other option than seeking a short-term personal loan.
If you already have some investments, let’s say, mutual funds, it is better to sell them off rather than taking out a loan. The benefits of liquidating your assets are you need not to pay any interest. But instead, you also get access to your earned profits, in terms of dividends.
That being said, there is also a catch to this option. It is only advisable to liquidate your assets if they have reached maturity. In some cases, your bank or your financial manager won’t let you sell funds.
Mortgage Against Your Property
Another alternative to liquidating your assets is seeking a mortgage against them. While most commonly, a mortgage is offered against an immovable asset, such as a piece of land or a house, but you can also access a mortgage against other high-value assets.
For example, you can seek a mortgage against your mutual fund’s policies, or you can also place your insurance policy as collateral.
The benefit of seeking a mortgage against your assets is only that you still own your assets. They are only being placed as collateral and will only be redeemed if you fail to repay your debt.
Organizing A Garage Sale
Quite possibly you’d have a lot of stuff at your home or your office that you don’t use anymore. There could be endless reasons for it including you may not need them anymore.
It is a good idea to sell them off to make some money when you know you don’t need them anymore.
Organize a garage sale for the stuff that you don’t use or need. Not only will it bring you the necessary funds but also help you get rid of all the clutter from your place.
Take Up A Side-Hustle
One of the best ways to make some quick money is by taking up a side-hustle. In fact, according to a survey, nearly 63% of Canadians have a part-time job apart from their regular stream of income.
Taking up a part-time job will solve your financial problems once and for all. Many part-time jobs are available either on a contract or hourly basis. It means you can expect to receive the payment for the work you do as soon as you complete and submit it.
It is noteworthy that you have endless options to choose from when it comes to taking a part-time job. You can take up freelance graphic design projects, or content writing orders. Or you can also take up a waiter’s job at a nearby diner. All you need is to know that you have the necessary skills needed to perform the task you take up.
Loan Against PF or 401(k) Account
Most of the time, financial advisors opine that withdrawing from PF or 401(k) accounts will harm a person’s credit score. And, as a matter of fact, this is true to some extent.
Despite the fact, there could be situations where you may find no other solution to your financial crunch.
But, still, it is rather best to seek a loan from your 401(k) account. The benefit is, your PF is still secure and all the interest that you pay adds up to your savings only. However, there’s a catch to this as well. When you take out a loan from your PF account, it is rather important that you pay it off in time. Otherwise, it may reflect as a distribution of payments and you may have to pay a penalty on the amount you borrow.
Facing a cash crunch is no ordeal. It could happen to anyone. What’s rather important is steering out of this financially troubling situation the most efficient way. You need to find a solution that not only fulfills your needs but also protects your financial future.
How to choose an accounting firm for your business?
Tax laws undergo changes and additions every year. All these changes tend to confuse businesses, trying to find what each change means for them. It is the role of accountant firms to keep track of all these changes in the tax laws. And thus, rescue businesses from getting trapped in financial hassles and tax liabilities. Accounting firms expertise in managing day to day accounts and advising companies on complex financial matters.
If you are starting your own business, you must be considering consulting an accountant firm for your finances. You don’t know when you’ll need them, and it is totally normal. Right now, you’re focused on transforming your idea into a settled business. And while you do that, we’ll take you through some essential tips on how to choose an accounting firm for your business.
Experience in the field
Several people have CPA credentials and can perform an audit for your business. But the critical factor is who has worked in your specific industry. A person or a firm which has dedicated years in handling nuances of your sector knows what will work best for you. They will be able to offer solutions for your problems more quickly and thus, manage your finances better. A sector like technology has companies with massive and complex accounting structure and investors having high expectations. A knowledgeable company should also be able to help you with business proforma, but don’t expect them to just include the service for free. Pro forma business analysis goes hand in hand with accounting services.
Similarly, some accounting firms have thorough expertise in the audit. But your company requires immediate assistance in taxation. Hence, it is essential to talk to the CPA about their proficiency in your sector and knowledge in different tax laws.
How much do they charge?
A fee is a vital aspect to consider when hiring an accounting firm. It is obvious that different firms charge differently. Large firms, like Deloitte, will charge massive numerations in comparison to a boutique accounting firm in your city. The fees also depend on the kind of assignment they are getting. There are firms which set special rates for every task while others offer a full year service and charge for the same. The prices per job depend on the task they get like preparing profit and loss statement, personal income tax filing or collecting a statement of net worth.
Some accountants write bills on hourly services. If that is the case, then you need to know the standard hourly rates and if these rates change often.
How important is the location?
Before the dawn of technology, having an accountant near me was important. But now, the boundaries of communication and collaboration have shrunk significantly. As technology advances, working with firms abroad through cloud-based technology is just as simple and effective as working face-to-face. There are cloud accounting features that allow you and your accountant to work on your finances and taxations using real-time data. It diminishes the confinement of location and thus, allows better search of services for your needs.
But the decision still lies in your hands. Your decision will be based on your finances and how to handle them. Honestly, while technology allows collaboration through the internet, there are certain situations which require face-to-face intervention.
Opt for a certified or chartered accountant
Several countries have governing bodies that check qualifications and maintain high accounting standards. In different countries, accountants are known with different names like Certified Public Accountants or Chartered Accountants. CPAs or CAs are highly qualified individuals who have completed degree-level studies with professional internship programs.
Hiring a certified or chartered account makes sure you get the right service and financial advice. Their qualification adds value to your business. It means to make sure your company grows from the word “Go!” you must hire a professional accounting firm from the start. Several tax preparation firms employ and train preparers to help clients through income tax filing. But when it comes to catering to more significant accounting needs, you’ll be better off with firms employing CPAs.
Can they grow with you?
When you invest in a business, you make it clear that you’re ready to enter the big leagues and with zest. To make this happen without any glitches, you need to have a CPA firm that has the human resources and expertise. Your CPA must stick with you to see you grow from a start-up to IPO or exit phase. There are countless things to consider: does the firm have the expertise to stick with you, does it has the staff for the job, or they are facing their acquisition? If any of this is true, you’ll have to go through the whole process of finding a new firm once again.
It might fine at the moment when you’re working with an accountant for small business. But once you start growing, you can’t waste time on finding a new CPA when you should be focusing on your business.
The team assigned to you
When you hire a firm to do an audit, you are buying the communication style of the team undertaking the service. An experienced team doing the audit will save you resources when they utilize their expertise and tools at hand. You need to ask the firm questions on who will be handling your case and if they will be a part of the meeting. Ask them about their previous experiences with other clients and how the following team works on-field. You must be sure that the team you are assigned is the best one.
Converse with government and business entities
Several countries stress on small businesses since they boost a significant share of their economies. To help small businesses grow, the government rolls out plans, packages, and assistance. If you are a small business owner, you can use this assistance and network of business entities to get an accountant.
Whichever accounting firm you choose for your business, remember that they will have access to your sensitive data. So, do your research and take your time to finalize one. Talk with your fellow business associates to get a picture of how accountant firms deal with clients. And since you have the power of the internet in your hand, use social media to dig in deeper. Trust is key!
Identifying the Reasons to Apply for a Business Loan & Exploring Effective Ways to Manage Your Business Debt
Independent ventures, apply for business advances for a large group of reasons. Business advances could emerge out of customary banks and numerous other elective sources also. Indeed, even credit associations give advances to different private companies. Getting cash could be costly for an organization and it has its very own ramifications and dangers. Independent of all that a business advance is certainly an urgent type of subsidizing private company activities. According to Forbes, “Choose what the cash is required for. There are great and awful explanations behind business credits. Valid justifications incorporate financing a bit of hardware, land, long haul programming improvement or huge occasional deals fluctuations. Awful reasons incorporate financing continuous misfortunes, office assembles outs, or securing trivial business resources.” Here we would talk about the main reasons why associations use obligation financing.
For Plans of Expansion and Buying Real Estate
Banks are happy to loan cash to existing associations that need to purchase land for extending their business activities. In the event that an association is making development arrangements, it is very clear to the bank that the business is progressing admirably and they would utilize the assets for growing activities and augmenting their viewpoints. These are the indications of a thriving business. In this unique circumstance, the bank is sure about loaning the cash to your business, as they feel that development as a rule, happens just if the association is turning benefits and there is certain income. Additionally, a business could consider development designs just on the off chance that they have positive guaging figures for what’s to come. Under these conditions, the bank is doubtlessly going to affirm your business advance. We realize that bank advances implied for land are commonly accessible as a home loan. In this unique circumstance, you should realize that long haul bank credits appear to be 25 to 30-year term advances and where the land would be utilized as insurance.
For Buying Equipment
Organizations are available to two key decisions or inclinations with respect to hardware obtaining. They could either buy it or they are allowed to rent it. There are some excellent motivations to put in a business credit application for purchasing business gear. You could acknowledge a tax benefit adding up to $25,000 during the principal year you obtain the gear and after that continue deteriorating the staying of the hardware all through its financial life. You may on the other hand utilize the hardware and later on auction it for explicit rescue esteem. Decide whether it is smarter to rent or buy the gear. You should consider doing the money saving advantage examination precisely before taking the correct choice. Bank advances for hardware are commonly middle of the road term advances. These advances are ordinarily, 10 to 15-year term credits.
For Buying Inventory
Banks are regularly known to make advances for purchasing stock, to different private companies. Numerous private companies appear to be particularly regular in nature, particularly retail business. Assume an association by and large makes most extreme deals during each Christmas season clearly, they might want to purchase their whole stock well ahead of time of the Christmas season. Subsequently, they might require a bank advance well ahead of time of the Christmas season for purchasing a colossal measure of stock for preparing for the Christmas season deals. For the most part, bank credits for purchasing stock are in reality present moment in nature. As a rule, the organizations would satisfy their obligations once the Christmas season is finished. They would utilize a piece of the returns from their general regular deals to reimburse the bank credit.
To Boost Working Capital
Working capital is alluded to the cash that would be required for maintaining your business easily and dealing with its everyday activities viably. As a general rule, little associations would require bank advances for the smooth working of the business once a day until they have sufficient gaining resources for covering their working capital prerequisites. When the business grows and twists and their own advantages are instrumental in acquiring cash, they could consider reimbursing their working capital advance convenient to the bank. We realize that working capital credits commonly have moderately higher financing costs when contrasted with, for example, land advances as they are viewed as more hazardous for the banks.
Overseeing Business Debt
You should comprehend the business obligation isn’t really oppressive. Nonetheless, it might trigger difficult issues if not viably oversaw. You have to consider a large group of basic factors before taking out a business credit. It is ideal to recognize compelling techniques for dealing with your business obligations. In any case, things could get off-base if obligations are not dealt with and overseen well. Give us a chance to investigate some stunning obligation the executives tips.
Organize Your Creditors
While reimbursing your business obligation, you may forget about what accurately you owe. When you are not ready to monitor your obligations, you may effortlessly miss reimbursements. The most ideal method for remaining over your obligations is to keep up an organized spreadsheet involving names of your loan bosses, the due dates all together, and the obligation sum and so forth everything composed unequivocally with the goal that you could get a reasonable thought of what precisely you owe your leasers each time you peruse through the spreadsheet. You could, from that point, decide the most savvy method for reimbursing all your current business obligations.
Consider Consolidating Your Debts
Obligation solidification is really the act of consolidating every one of your obligations and folding them into one bigger credit with a lower loan cost and a solitary regularly scheduled installment. Taking out an obligation union advance is somewhat dubious so it is ideal to know the benefits and negative marks of this obligation the executives technique that guarantees to kill your obligations. Peruse through obligation combination audits online to settle on the correct choice.
Lower Rate of Interest: When your numerous obligations are merged into one major obligation combination advance, you would be certainly attempting to get a lower loan cost than your past obligations. With the goal that the sum that goes toward intrigue installments would be lower than previously.
Single versus Multiple Payments: The principle reason for merging your current obligations is to settle on a solitary straightforward installment consistently rather than various installments that are hard to recollect and oversee. This would chop down time superfluously spent on monitoring various lenders and organizing obligations consistently.
Moderately Smaller Outflow Every Month: Since your obligation union credit would be offered to you at a lower financing cost and the way that you would need to make only one single straightforward installment consistently, the general month to month money outpouring would be littler.
Simpler to Get Back to Square One: Once the entirety of your obligations are combined into a solitary regularly scheduled installment, you may fall back effectively into obligations due to your attitude that now you are allowed to spend all the more utilizing your business charge card.
Longer Loan Term: The bank may bring down your financing cost however he may broaden the credit reimbursement term. So you would wind up paying more as far as enthusiasm over the more extended credit reimbursement term.
Chalking Out a Robust and Stringent Budget
Continuously monitor every one of your costs and pursue a strict spending plan. By chalking out an unmistakably delineated spending that can guide out the entirety of your foreseen costs, you would most likely exhibit precisely where the cash is and accurately where it would be sooner rather than later.
End: Consider Thinking Long-Term
It is a smart thought to build up a crisis represent your business. You may believe this to be unreasonable at this point yet according to confided in specialists, this is the perfect time for preparing and making compelling arrangements to withstand unforeseen stuns. Keep in mind business obligation need not really be upsetting. Make shrewd future arrangements and continue onward of the rest in 2019.
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