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Law Pro
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Category: Business Law
Satisfied Customers: 24870
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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My wife and I currently own a retail store which is not self-sustaining.

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My wife and I currently own a retail store which is not self-sustaining. We are constantly putting our own funds into the place to keep it going (i.e. to pay bills). Rather then dwindle down our personal safety net, I've thought of some options. They are as follows:

1. Take out a business loan that is absent a personal guarantee.
2. File for Chapter 11 bankruptcy.
3. Wait 6 months and see if business gets any better.
4. Place the business on the market as soon as possible.
5. Contact a marketing company to increase business.

What are the legal and tax advantages/disadvantages of each option?

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Sorry for your situation.


All those options except the contacting a marketing company involve another company making a loan or the bankruptcy court thinking your business can continue to operate - but if your not able to meet your debt obligations no one will agree to such.

Do you have business debt that is causing your business not to be profitable?
Customer: replied 4 years ago.

I would appreciate you responding to each of the options separately please.

I don't understand nor will you be able to:

1. Take out a business loan that is absent a personal guarantee.

Won't be able to do if the business isn't profitable - no one will loan you monies without a personal guarantee AND the personal assets to cover the loan.

2. File for Chapter 11 bankruptcy.

A Ch 11 bankruptcy is a viable option ONLY if the business can discharge some of it's debts to be profitable. If there are no debts except for the ongoing monthly business expenses - a Ch 11 bankruptcy is not a viable option and the bankruptcy trustee won't confirm the Ch 11 plan.


3. Wait 6 months and see if business gets any better.

I can't give an opinion about this because I don't know what your business is nor the local market nor your business's market.

4. Place the business on the market as soon as possible.

Not worth much other that the asset value if the company isn't making money or losing money - no "goodwill" in the name or business.

5. Contact a marketing company to increase business.

Again, I can't give an opinion about this because I don't know what your business is nor the local market nor your business's market.
Customer: replied 4 years ago.

Thanks for the detailed responses. Maybe I didn't describe the situation as accurately as I should have. I believe per our tax returns that we have posted a profit in each year in operation (3.5 years thus far). This is because we don't pay ourselves and reinvest all monies received back into the business each year. The problem is that during some months, the revenue stream is not enough to cover the inventory expenses and/or rent. Therefore, at times, we are compelled to invest some of our own funds into the business.

So you are "building the business" - that's great! I had a totally different picture of the situation. Sorry for any confusion.

That being said - still bankruptcy is not really an option.


Do you want to continue the business or sell out?

Do you think if you had some monies to invest (say an SBA loan) that the influx of monies buying rent and marketing services would make your business profitable enough to pay for the loan?
Customer: replied 4 years ago.

We just got a free-standing external sign installed after 3 years of trying to get an approval. We would like to continue, however, not continue pouring our own money into it.

I guess an option is to see what the market would bear for your business.

I would talk to a business broker to find out there thoughts on the value of your business.

There's VR Business Brokers

VR Business Brokers


www.vrbusinessbrokers.com



Ventures in Capitalism

Ventures In Capitalism - Business Brokers


www.venturesincapitalism.com

If you "google" Connecticut business brokers you get a list of companies who sell/market businesses.


I would think your business certainly has value and goodwill value - how much I couldn't say but an accountant/CPA and business broker could give you an "idea" as to the market value of a business with our financials.

Maybe taking in a partner - an influx of money and an associated business??

Maybe seeing what it's value is - you just might want to sell and move on to something else after all your hard work and efforts.

I think you have to have a professional evaluate the business and give their opinion as to it's worth to make a decision as to sell or not.

Most definitely a ch 11 is not an option really for you.

It takes time for a business broker to evaluate. Maybe, after looking at your financials - you may be doing much better than you think in reality. It may not be progressing as fast as you would like though.
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