With the downturn of the economy and its slow recovery in many business sectors, certain businesses or portions of businesses may no longer be profitable or able to hold on until better times return. While the pressure of creditors and an unprofitable business increase, it is important for business owners to remain calm and consider all viable options in order to provide for a controlled and soft landing when terminating their business.
Downsizing or reducing your business carries certain risks, as numerous labor, tax and other laws and regulations impose obligations on employers when laying off staff. Unemployment insurance, and other costs will be effected, and reductions in force must be handled within the established guidelines to avoid gender, race, age and disability discrimination. Do not compound the loss that caused the downsizing of your business by downsizing without a plan and proper advice. Downsizing, reorganizing or refocusing your business may be the best option, concentrating on the portions of your business that are profitable and jettisoning the portions that are not. Strategic mergers, business division sales, vendor/customer joint ventures and employee ownership are also strategies that should be considered. Any actions you take should focus on increasing the probability of success and decreasing, or at least not increasing, your exposure to personal liability.
Cessation of your business or parts of it may also be the appropriate course of action. While formal proceedings such bankruptcy, either Chapter 11 (reorganization) or Chapter 7 (liquidation), are most often considered, the benefits of bankruptcy may not be worth the expense and risk. There are other and often less expensive ways to terminate your business such as assignments for the benefit of creditors, sale of assets, accord and satisfaction with creditors, business division and corporate dissolution. Care must be taken to avoid actions that may impose personal liability on you or others as a result of the termination of your business, or that leave debts or obligations resulting from the operation or the method of liquidating your business that creditors can pursue against you. Proper advice and counsel can identify and help avoid these lingering liabilities or help you manage them on a going forward basis.
If we can assist you with the problems arising from the downturn of the economy on your business or addressing creditor claims, please contact us.