Death of a Business – Part 2
I am going to start the series of how to manage a business failure – or business closing – at the beginning.
The legal part.
There are many other parts of closing a business that I will be discussing, but starting with the legal aspect is not only extremely important, but it also gets a bit of stress off of your shoulders, organizes the mess, and officially starts the process.
It is also one of the emotionally hardest parts.
Your business is your life! You raised it from nothing, like a baby, and put all your heart, soul, blood, and, unfortunately, money into it. That is why it is so tough – and justifiably so. But, it needs to be done. It doesn’t necessarily mean that there isn’t hope to keep your business going, but you need to do it to protect yourself and your family.
So, to start, open the yellow pages or get on the internet. Find a local lawyer that has experience with business bankruptcy. Call them up, and set up a meeting.
Extra note: You will most likely be dealing more often with the lawyers paralegal, so get to know him / her. You are paying them to help you, so don’t feel bad if you need to call them every day. I called my lawyer all the time with questions. No question is to dumb. They are good at what they do – that is their job. And, it’s about time someone was there to help you for a change.
Note – I am not advising you to go bankrupt – just that you need to speak to a lawyer to review your options.
I think I paid about 2,000 dollars to the lawyer. I remember saying “if I had $2,000, I wouldn’t be going bankrupt!” True, but that’s what it takes. Whether you have the money or not, you have to find it. Most lawyers will take partial payments spread over a few months.
For the first meeting, you don’t really need anything except your story. Go to the meeting, meet with the lawyer, and lay it all out to him. Don’t hide anything – they are there for you, and are there to protect you. You will fill out some paperwork, and they will go over your companies financial situation. Give them a good approximation – you will get them all the paperwork for the next meeting. If you don’t feel comfortable with the lawyer you met, by all means – find another one. They should be more than willing to help, be friendly, and available to answer any question. Also, the first meeting should be free.
After you meet with the lawyer and spill your guts to him, you will need to get him the facts. Make a list of every (and I mean every) person your business owes money to, including employees, vendors, contractors, leases, bank loans, and customers (if you owe them product or services they already paid for or signed a contract for). Give them their names, addresses, and phone numbers, along with how much you owe them. You will also need to bring the last two years of tax returns if you have those. You will also need to bring a list of any assets your company has (machines, desks, computers, supplies, etc) and their approximate value.
After that, they will tell you the best part – you are not to speak with anyone that you owe money to. The lawyer will contact every person you are indebted to, send them a notice of intent to bankrupt, and instruct everyone to call the lawyer, and not you. If someone does call you, you need to give them your lawyers information, and tell your lawyer that they called you. The lawyer might have missed sending them the information.
That alone will remove a great deal of stress from your back.
Also, if you do decide to go bankrupt, the lawyer will tell you that you cannot go out and sell anything else under the business name.
Another thing to note, that I am sure you wish you knew at the beginning of your business – if you owe money to people and have signed a personal guarantee, make sure to point that out to your lawyer. After my business shut down, I still owed the money to people I personally guaranteed. That really (and still does) financially hurt. Bankrupting a corporation does not get rid of personal guarantees. So the next time around, be on the lookout for those, and avoid them if you can. It’s not always possible to avoid, but keep an eye out.
Once the lawyers take over, you can pretty much turn the sign on your door to “closed” and go home. It will be hard, but it does get better.
The whole business bankruptcy takes a surprising long time. Depends on where you are, but mine took about nine months. You will eventually have to go to court with your lawyer (that is important – make sure they go with you). Your lawyer will pretty much speak for you. And don’t miss the court date. I missed my first day in court – it wasn’t pretty. In court, some of the people you owe money to might be there – they want to know what place in line they will be in to collect money. If you business has any assets to sell, the legal clerk will take charge of that. Mine had about $10,000 in tools and furniture, and the clerk decided that it was not worth it for him, so they gave it all to me. (At the time, I was so depressed with the whole situation I just left all my stuff in my warehouse and walked away.)
There will still be leftover stuff you might have to deal with – sending papers to the IRS, your final corporate tax return, personal liabilities, and such. Again, after it is all done, you can still call your lawyer and ask for advise.
In the end, the whole process is pretty simple. Sure, you might still get mail from vendors, but just bring any bills or nasty letters to your lawyer and let them deal with it.
Good luck. It does get better.
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