As a small business owner, you hope that financial problems never come to the forefront. Unfortunately, this has a way of creeping up on you when you least expect it.
While you never want to go through bankruptcy, it's good to know that this is an option that could bring you some relief.
Chapter 11 bankruptcy is often associated with large companies, however, smaller businesses can also take advantage if they meet the requirements.
Although you may file Chapter 11 bankruptcy to start, don't be surprised if this is dismissed and then converted to Chapter 7. This may sound confusing, but it's something the court does if it realizes that you have no chance of becoming profitable in the future.
If you're interested in considering Chapter 11, you'll want to gather all the necessary documentation. This includes but is not limited to:
-- Statement of operations.
-- Copy of the company's most recent balance sheet.
-- Cash flow statement.
-- Copy of your federal income tax return for the past few years.
There are definite benefits of Chapter 11 bankruptcy, however, you also need to consider the drawbacks. For example, this can be a costly process that drags on for an extended period of time, thus taking away from the focus on your business.
If you have reason to believe that bankruptcy is the best option for your business, it's a good idea to consider Chapter 11 as well as the other types. Once you know where you stand and how to move forward, you can decide what to do next.
Source: FindLaw, "Chapter 11 Bankruptcy," accessed Oct. 25, 2016