In our years in practice, we’ve worked with many businesses and business owners who chose a bankruptcy filing to either wind down or restructure a business. In many instances, the factors that led to the bankruptcy were beyond their control—accident or illness, changes in laws affecting their business, or just bad luck. But far too often, we’ve seen business owners engage in actions that contributed directly to the failure of their business enterprise. In this series, we’ve looked at some of the most common “strategies” to avoid, if you want to stay in business.

Strategy #5—Consider Whatever Is In Your Checkbook to Be Yours

Far too many business owners operate under this assumption—once I’ve collected on my accounts and paid my bills, whatever is left over is my income. There’s a better approach. Keep money in the business to cover reasonable eventualities and pay yourself a realistic salary, just as you would pay any other employees. Try to keep cash reserves, for the inevitable unexpected challenges, eg a slow-paying or non-paying customer.

Strategy #6—Just Do What You Do and Do It Well

On its face, this seems like a good approach—focus your energy on being the best you can be. But you need to know your market and your customers. You can’t ignore the marketplace and you can’t ignore what your competitors are doing. If you do, you may find the market has changed and you are too far behind your competitors to catch up. If you don’t keep an eye on what your customers want and what they will buy, plus what other market players are doing, you can quickly lose any competitive advantage.

Strategy #7—Commingle Business and Personal Matters

Often, business owners will spend significant time and expense to create a limited liability company or a corporation, so that their potential financial responsibility for the debts of a business can be controlled or reduced. Unfortunately, they will then turn around and operate the business like it’s a sole proprietorship, failing to properly document payments from the business or taking other action that ignores the legal structure. If the business fails and it appears that the limited liability or corporate status was a sham, you can be liable personally for the obligations of the company.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, weprovide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

In our experience, a business can end up in bankruptcy for a lot of reasons, many of them out of the control of owners or employees. But that’s not always the case—we’ve seen far too many business owners make the same mistakes and, in this series of blogs, we are chronicling the ones we’ve seen most often, so that you can avoid those pitfalls.

Strategy #3—Don’t Pay Attention to Anything Other than Your Product or Service

Unfortunately, for many small business owners, their expertise and knowledge is focused primarily on the product or service provided. They don’t have a solid understanding of anything other than the most basic finances. There’s money in the bank account, (they think) so they must be okay. It’s a very short-sighted strategy and almost always comes back to bite you. If you don’t have the financial experience, or you don’t like to handle the finances, find someone who can and does, or invest in some of the bookkeeping software available. If you can’t afford to do that, you’ll need to either bite the bullet and learn how to do it yourself, or decide whether you really want to be in business for yourself. Without the proper attention to costs and finances, your success will be nothing more than a crap shoot.

Strategy #4—Start or Fund Your Business with an “Informal” Loan from Yourself, Your Family or a Friend

When your business is just an idea, it can be natural to envision nothing but success. Accordingly, you might be inclined to borrow from friends or family members without documenting the loan in writing. If the business struggles, you can expect the lenders to get nervous and start asking a lot of questions about how they’ll get paid back. Whenever you need a loan, you should treat the transaction as if you were working with a bank. Keep the loan on your books, the same as you would with a commercial lender.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, weknow that the bankruptcy process can be intimidating and confusing. Weoffer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

In many instances, the factors that force youinto a business bankruptcy are beyond your control. You may have a serious illness or lose a key partner, or your market may simply collapse. Often, though, it’s the things you do or don’t do that will get you into trouble. Here’s a list, based on a quarter of century’s worth of experience, of some of the mistakes that will increase the likelihood your business will end up in bankruptcy.

Strategy #1: Wing It

Far too many people go into business without any type of plan, hoping everything will be okay. If you don’t know what your cost of materials or services is, or you can’t identify your target market, or you don’t have a handle on what will make your business profitable, you’ll likely encounter a number of surprises and won’t be equipped to handle them when they arise. The more time you spend on creating a realistic business plan, the less risk your business will fail, or that you’ll end up with substantial debt if it does. The money spent on good business plan software is well worth the expense. Once you are up and running, you have to have systems in place to watch the finances, expenses and cash flow. Ignorance IS NOT BLISS! See Part Two.

Strategy #2: Don’t Pay Your Taxes

When things are tight and you feel like you’re on the cusp of real success, you might tell yourself that you can use the money set aside for sales taxes or payroll taxes for operating expenses. You tell yourself that you’ll catch up in a couple days or a week, when the next payment comes in. It’s usually magical thinking and it’ll get you in trouble in a hurry. Two additional caveats—owners and managers are personally liable for the employee withholding portion of payroll taxes, and those taxes cannot be discharged in a bankruptcy.

Contact Neuner & Ventura, LLP

We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey