Many debtors come to us after a business they started with their nest egg has tanked. They tell us about how well they were received, how a lifetime of contacts made all the difference, and how their financial circumstances were complicated by unforeseen circumstances and mishaps. They then tell us all the things they did wrong as they watched their life savings slip from between their fingers. The one thing that all of these interviews has in common is that the people involved acted in good faith and tried to do the right thing for everyone – except themselves.
Here is an abbreviated laundry list of the things people do in their “retirement” business that come back to bite them in the end:
1. Paying the final payroll in full without paying the taxes over to the government.
2. Paying vendors who have been personally involved in encouraging and supporting the business.
3. Entering into last minute “can’t loose” solutions that involve new business entity formation.
4. Transferring money or property to family members so that “no one will get hurt.”
5. Finishing contracts that were losing propositions to begin with so that you can “maintain your reputation.”
All of these moves may seem logical and helpful at the time, but, in reality, almost every one of them will likely be the cause of some headache and personal loss in the future. But, the biggest mistake that business owners make is that they fail to take action to protect the value of the business early enough that in a sale they could pay debts, avoid liabilities, and see their creation live on with or without them. Even thinking about one of the above alternatives should translate to a message that you should see a Bankruptcy Attorney or a Turnaround Specialist.