Hundreds of thousands of new companies are started each year, and between 30% and 40% of them fail. In other words, between 30% and 40% of new small businesses are liquidated and the investors lose all or most of their money.
If you define failure as failing to reach the projected return on investment, 80% of new small businesses fail, according to Harvard Business School.
And that is during normal times.
Failure of some kind is virtually inevitable, but it can be the path to ultimate success. Whether it will be depends in part on whether you exit your failing business relatively unscathed. That depends in part on how you wind down and close out your business.
Unfortunately, it can be a challenging time in which to seek advice from a business lawyer. You may feel that it is far too late for a business attorney to help. You may find it difficult to justify the expense. But a business lawyer’s advice could be the difference between owing money and closing down even.
Business to take care of when you are closing down a company
There are concrete details necessary to close down a business, whether you do so voluntarily or through bankruptcy, such as:
- Notifying investors
- Terminating employees
- Dissolving the business entity
- Surrendering any leases
- Paying outstanding debts
- Canceling credit accounts
- Closing the company’s website and email accounts
- Selling off any tangible assets
- Getting a valuation of any remaining assets, including intellectual property, client lists, brand identity, business goodwill, and other intangible assets
- Enforcing any non-compete or non-solicitation agreements
Having assistance with these details could be invaluable. Not only could it help you make the most of your remaining assets and rights, but it could potentially allow you to limit your personal liability for the business’s debts and losses.
If your business is in financial trouble, you may have the option of filing Chapter 7 or Chapter 11 bankruptcy. Chapter 7 allows you to liquidate the company’s assets in order to pay off your creditors. Chapter 11 could allow you to reorganize your company and shed debt so that it can regain its footing.
A good business attorney can help you analyze where your business is now and evaluate whether it could be made profitable under different circumstances. Then, your business lawyer can help you decide whether Chapter 7, Chapter 11 or another solution best meets your needs.