There is no magic formula for keeping your small business out of bankruptcy. In fact, small business fail at an average rate of as much as 44% by their third year of business. The primary reason for failure is incompetence.* Specifically, the incompetence can be attributed to the business being “too big for its britches,” non-payment of taxes, lack of planning, no knowledge of proper pricing, no knowledge in finance, and lack of bookkeeping and record keeping.
So what can the struggling small business owner do to stay out of bankruptcy?
Cut your expenses – Don’t let your ego get the best of your business. If you can’t pay the bills, you have to cut expenses. Sometimes this means dreaming smaller instead of bigger. Develop a budget and stick to it. Pay the bills you can and negotiate other expenses with your suppliers and other creditors.
Hire a competent bookkeeper – You get what you pay for. A competent accountant is key to a successful small business.
Pay your taxes – Especially your payroll taxes. The Internal Revenue Service (IRS) can hold you personally liable for the taxes withheld from your employees’ paychecks. This type of debt cannot be discharged in bankruptcy.
Be truthful about your financial situation – Don’t lie to yourself, your bankruptcy lawyer or lenders. Failure to properly disclose your financial situation to lenders when trying to consolidate debt or borrow money could to lead to way deeper troubles down the road. If you are facing bankruptcy, don’t try to hide personal assets by giving them to family or friends. If you do end up in bankruptcy court, these assets will be discovered and you could be accused and convicted of fraud.
If your small business is dealing with unmanageable debt or other problems that threaten its continuation, there are a variety of options, including bankruptcy, that might be a viable solution to getting rid of debt and saving your business. We can help you untangle your most complex debt issues while protecting your best interests. Remember, the longer you wait to deal with a failing business, the fewer options you have. Contact us at (406) 752-5616 to discuss your options.