The economic fallout and business shutdowns in the United States following the coronavirus pandemic have put many small business owners in dire financial straits. According to an August 2020 U.S. Census Bureau Small Business Pulse Survey, about 79% of small businesses have felt a moderate-to-large negative impact of the pandemic. If your business is struggling financially, filing for bankruptcy may be a viable option for debt relief so that you can keep your company afloat.
Here at our firm, Attorney Sam Thomas is dedicated to offering reliable legal services that can guide clients through the complicated process of small business bankruptcy. With an experienced Ohio bankruptcy attorney on your side, you’ll have someone who can evaluate your unique financial situation and educate you about all of your legal options. Attorney Sam Thomas and his legal team can offer you the detailed legal counsel and strong advocacy you need so that you can make informed decisions about your future as a business.
Building a business takes years of hard work, dedication, and sacrifice. It can be demoralizing to see everything that you’ve worked so hard for struggle when things get tough. Following the outbreak of the coronavirus pandemic, a lot of business owners have plunged into huge debts. In a situation like this, filing for bankruptcy can help you achieve immediate debt relief and give you the time you need to reorganize your finances and keep your business going.
In order to choose the ideal bankruptcy chapter for your unique situation, you need to consider a number of different factors, such as your business structure and your plan for the business moving forward. Here's how these factors can influence your bankruptcy filing decision:
The legal structure of your business can help determine the type of bankruptcy that’s best for you. The three most common classifications of businesses structures include:
Sole Proprietorship - In a sole proprietorship, the business owner (or sole proprietor) has complete control over the business. The sole proprietor will receive all business profits and pay taxes. However, both the business owner's personal and business assets are exposed to liability or debts.
Partnership - A partnership involves two or more persons who serve as co-owners of the business. The partners will be held responsible for the business debts, liabilities, and actions of the partnership.
Limited Liability Companies (LLC) - Unlike other business structures, an LLC offers corporate protection to its members. LLC members will not be personally responsible for company debts or liabilities.
Furthermore, the plan for your business going forward can also determine the ideal bankruptcy option for your situation. Here are some important questions to consider:
Do you want to keep your company afloat while you restructure?
Do you plan to liquidate business assets and close the company?
Will it be better to continue or suspend business operations during this time?
Your answers to these questions can point you in the right direction so that you can better understand the ideal bankruptcy option for you.
The most common bankruptcy options available to small business owners in the state of Ohio include Chapter 7, Chapter 11, and Chapter 13 bankruptcy. These three types have a few various advantages and disadvantages that are worth exploring for your business.
Through Chapter 7 bankruptcy, or "liquidation bankruptcy," individuals and business owners facing financial adversity can wipe out most of their general unsecured debts. The Ohio courts will appoint a trustee to oversee your bankruptcy case. The trustee will gather and sell your non-exempt assets and use the proceeds from the sale to pay off some or all of your creditors.
Non-exempt assets are assets and properties that can be sold in a Chapter 7 bankruptcy case. These include any second cars, vacation homes, second homes, stocks, bonds, family heirlooms, and other investments.
Chapter 11 bankruptcy, also known as "reorganization bankruptcy," is designed to help businesses reorganize their affairs, assets, and debts. Here, the debtor (business owner) will propose a repayment plan to the creditor. This enables the business owner to repay debts using future revenue while they keep the business running.
Furthermore, Chapter 11 bankruptcy generally works best with partnerships and LLCs. The major drawback is that filing for Chapter 11 can be an expensive and time-consuming process. The proposed repayment plan must be approved by both the court and the creditor before moving forward.
Chapter 13 bankruptcy, also known as "wage earner's bankruptcy," is available to individuals and small business owners who earn a regular income but are struggling with debts. The debtor will propose a structured repayment plan to the creditor to repay their debts using their future earnings over a period of three to five years. Under Chapter 13 bankruptcy, the business owner will be allowed to retain their assets and property, including their home, cars, and other personal belongings.
Filing for small business bankruptcy is nothing to be ashamed of. According to statistics from The American Bankruptcy Institute, there were roughly 21,655 business filings in the United States in 2020. These business owners didn't go through this process alone, and neither should you. If your business is struggling financially and considering filing for bankruptcy, it is crucial that you speak with a knowledgeable bankruptcy attorney to review your options.
Here at our firm, Sam Thomas III, ESQ. LLC, we have the resources and experience needed to assist and guide small business owners through the complexities of bankruptcy proceedings. As your legal counsel, we will review your unique financial situation, help you understand all legal options that are available to you, and help you choose the ideal bankruptcy option for you and your business.
Attorney Sam Thomas and our experienced legal team can help you file your forms, assist with the necessary documentation, and represent you through any court proceedings. We will do everything we can to negotiate a feasible debt resolution with your creditors or establish a repayment plan that works best for you. Through it all, our team will guide you through every stage of bankruptcy proceedings and help you navigate key decisions along the way. So don’t wait. Call or reach out to our office today to schedule your own case consultation!
Filing for small business bankruptcy is a huge decision that requires reliable legal counsel and guidance. If you’re considering bankruptcy, contact Sam Thomas III, ESQ. LLC today to schedule a one-on-one case assessment. Attorney Sam Thomas and our legal staff can offer you the experienced legal counsel and reliable advocacy you need so that you can make an informed decision about what to do next for your business. Our firm proudly serves clients in Shaker Heights and Cleveland, Ohio, and throughout Northeast Ohio, including Akron, Canton, and Youngstown. Call today to learn how we can help you with your case!