BANKRUPTCY OPTIONS FOR SMALL BUSINESSES
According to the Small Business Administration, small businesses — that is, businesses with fewer than 100 employees — account for 99.9% of all U.S. businesses. The coronavirus outbreak has led to business closedowns, which has affected numerous small businesses in the United States. If your business has been affected by COVID-19 closedowns, and you are struggling with debt, filing for bankruptcy may help you get some relief.
At Pytte Law, I am committed to offering outstanding representation to business owners in bankruptcy-related matters. I'm available to discuss your unique situation and help you understand your small business bankruptcy options. A one-on-one consultation with an experienced Georgia bankruptcy attorney is crucial for detailed guidance and advocacy. I'm proud to serve clients throughout Savannah, Hinesville, Richmond Hill, Ludowici, and Liberty County, Georgia.
Considerations in Bankruptcy
Your business likely took years of hard work and passion to build so it’s not easy to see it struggle. Filing for bankruptcy can provide debt relief and give you options to restructure but there are several factors to consider in choosing which chapter of bankruptcy best fits your needs.
One of the factors to take into consideration when thinking about bankruptcy is the legal structure of your business.
Sole Proprietorship: The sole proprietor (or business owner) has complete control over the business, pays taxes, and receives all profits. However, both the personal and business assets of the owner are exposed to liability.
Partnership: A partnership involves an association of two or more individuals that serve as co-owners of a business. Partners will be held liable for debts, liabilities, and actions of the partnership.
Limited Liability Companies (LLC): LLC provides corporate protection to its members. They are not personally liable for their company's debts.
Plan for the Business Moving Forward
Another factor in determining which bankruptcy option would be best for your small business is what your plan is for the business moving forward. For example, is it your intention to close the business for good or do you need a way to keep it afloat while you restructure and rebuild?
Your business structure and plan will help determine which chapter of bankruptcy will best fit your needs.
Chapter 7 bankruptcy or "liquidation" bankruptcy, helps individuals and small businesses wipe out most of their general unsecured debts and get a "fresh start." If you're a sole proprietor, you and your business will be treated as one. Therefore, you can discharge some of your unsecured debts by filing a Chapter 7 bankruptcy using your name. Conversely, Chapter 7 isn't beneficial for a partnership, LLC, or corporation because it will only increase liabilities since the business structure doesn't permit for debt discharge.
Chapter 11 or "reorganization" bankruptcy involves a reorganization of the affairs, assets, and debts of a business. In Chapter 11, the debtor proposes a plan to pay creditors over time and keep the business alive. It is often suited to corporations, LLCs, or partnerships. However, filing for Chapter 11 bankruptcy can be expensive and lengthy and the repayment plan must be approved by the court and sometimes the debtors.
Through Chapter 13 bankruptcy, small business owners can keep their assets while they reorganize and pay off all or some of their debts through a repayment plan spread out over three to five years. Chapter 13 is only available to sole proprietors filing as individuals. It’s beneficial in that the business owner has no direct contact with creditors and it allows for a discharge of a wider range of debts. However, all disposable income is channeled into the repayment plan and the business owner reports to a trustee who distributes all payments to creditors.
Subchapter V bankruptcy was put in place to help small businesses get relief amid the COVID-19 pandemic. Also referred to as the Small Business Reorganization Act of 2019, Subchapter V raised the maximum allowable debt limit from approximately $2.7 million to $7.5 million. However, the Act's provisions regarding bankruptcy matters will only be valid for a limited time.
Experienced Bankruptcy Attorney Serving Savannah, Georgia
At Pytte Law, I have dedicated my career to guiding small business owners through the bankruptcy filing process. As your legal counsel, I will evaluate your unique situation and determine which bankruptcy option is right for you and your business.
I can also help you file your forms, represent you throughout the court proceedings, and negotiate with creditors to set up the best possible repayment plan. I will guide you through the filing process and help you navigate key decisions
If you are going through financial adversity amid COVID-19 closedowns, and considering filing bankruptcy, call Pytte Law today to schedule a free one-on-one consultation. I can provide you the experienced legal counsel and advocacy you need to get a fresh start. Pytte Law proudly serves small business owners throughout Savannah, Hinesville, Richmond Hill, Ludowici, and Liberty County, Georgia.