Debt Restructuring: Allowing Businesses to Breathe - Restructuring Advisory Group

Every business faces a rough patch. The world economy isn’t really in its brightest periods in the last couple of years, so the struggle to stay afloat in the market is very real. In such challengingly uphill circumstances, it is rather obvious that companies and individuals may have acquired loans and debts along the way. The big question is: how does one repay them without having to face problems? Well, the answer is simple – debt restructuring.

In the last couple of years, the phenomenon of debt restructuring continues to grow significantly and get popular among people and business. From the perspective of a business company, debt restructuring is just the solution which can anchor companies on their way back up. The following article contains handy insights as to how businesses can restructure their debts and survive in fluctuating markets. 

The first step is to detect what is the root cause of your debt problems. You could either be not selling to many of your products or services or your payment collection process is very slow, or you are shouldering more debt than you can handle. If either of these or all three are your concerns, then cash flow shortage is likely to be a huge issue. The best for you is to not simple duck down and avoid the problem for as long as you can. Instead, how about you consider your options and proceed to taking the best course of action available: Such as debt restructuring.

The best yet the most challenging way to restructure your debts is by reaching out to your creditors. Well, some will entertain the request for leniency in repaying the debts. Other creditors may not be willing to soften. If latter is your scenario, then you should waste no time and arrange for a meeting with a debt restructuring service. The specialists will use your details and their acumen to come up with a restructuring deal which seems sweet to all parties involved – the borrower and the lender. If you’re a small business, then the good news is that a debt restructuring firm will take you on board immediately. These outlets lean on small and medium-sized businesses to get clients.

If you build an alliance with a debt restructuring firm, rest assured, you will not need to be all ears to your creditors, their lawyers, collection agencies etc. The debt restructuring firm will represent you. You can simply go about doing business as usual. 

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Business Debt and Personal Liability - Restructuring Advisory Group

If you are a business owner and your business is facing some financial hardships, one of the things that you are likely to be worried about is whether your creditors can come after your personal finances such as your personal bank account, your wages or even your house. The first thing to do here is to figure out whether you are liable personally for the debts that your business has accrued. Remember that debts that your business is liable to pay and debts that you are personally liable to pay are two very different things. Therefore, you must determine what debts you personally are liable for.

The most important thing to know here is that if you have employees, regardless of whether your business is a partnership, LLC, sole proprietorship or corporation, and it has withheld taxes from their wages, you are personally liable to pay these taxes if the business does not pay them. Apart from this as far as any other type of business debt is concerned, what determines your personal liability is the structure of your business and the type of purchase order or contract you signed.

Partnerships and Sole Proprietorships

If your business is structured as a sole proprietorship or a general partnership, you are legally the same as your business and therefore, are personally liable for all the debts that the business has. There is a twist in partnerships. The personal liability of each partner is 100%, i.e. the creditors can take everything from one partner to pay the entire debt, not just a pro-rated amount.

LLCs and Corporations

If your business structuring is that of a LLC or corporation, you are a separate legal entity from your business. What this means, at least in theory, is that you have no personal liability as far as your business debts are concerned and the creditors can’t come after your personal financial assets.

In real life, however, this is not at all a common situation. LLC members or shareholders often become liable for a business debt through various means. Some of them are putting up property as collateral, offering a signed personal guarantee, getting personal loans or credit cards and using them to provide funds for the business, using your own name to sign a contract, misrepresenting, perpetrating fraud or keeping records in a sloppy and disorganized manner.

If you do find yourself personally liable for your business debts, you can negotiate a settlement for the business to pay the debts off. Another option you have is to file for Chapter 7 bankruptcy which will get rid of your business debts or your personal liability.

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