Being an entrepreneur is more difficult than many people realize. It involves hard work, an innovative streak, and many sleepless nights. Simple mistakes can overtake your best efforts and put your business in financial jeopardy. Here are a few of those mistakes and some solutions an experienced bankruptcy attorney may provide:
- Mismanaging Start-up Loans/ Financing
Securing capital is the first step in creating a startup. Whether that capital comes from family members, friends or strangers, producing a return is expected. Not delivering on those returns could land your business in trouble with its investors and securities laws. A business workout could help avoid this conflict. This out-of-court solution may allow businesses to negotiate new terms for an investment.
- Failing to Make Equity Arrangements and Vesting Schedules
Vesting schedules guide how business founders earn shares over time, and equity arrangements formalize the stakes each founder has in a business. Without these business plans, an entrepreneur could find a large part of their business taken away if a co-founder jumps ship. Filing for Chapter 11 bankruptcy can help stabilize businesses after a co-founder’s departure, since the Chapter 11 could keep business operations going while restructuring gets underway. This is because creditors will need to accept reduced payments to pay off debts over time, which can give your company a chance to adapt.
It might sound obvious, but entrepreneurs are often so focused on getting the urgent tasks for the business accomplished, like increasing sales, internal organization and productivity, or securing funds that it’s common for them to fail to set up the legal structures of the company. Entrepreneurs procrastinate by thinking they can always address legalities after the business is running just a little bit more efficiently. They also fail to respond to financial troubles such as collection calls from creditors, hoping that delays will help them build the needed funds. Business workouts and Chapter 11 bankruptcy can give you time to deal with the fallout of procrastination, but they can only help if they are deployed. If you put off filing for one of these two legal options in a timely manner, further procrastination will only multiply debt, making the situation worse the longer you wait.
The Sader Law Firm has solutions for businesses that need financial help. Our bankruptcy attorneys represent debtors as well as creditors who wish to protect their investments. To learn more, contact attorney Neil S. Sader at (816) 281-6349.