In these uncertain times, many business owners face multiple challenges from different directions. We have never been in a situation quite like this before, and we do not know whether it will be safe to resume ordinary business operations in a month, six months, or even a year. The U.S. Chamber of Commerce predicts that over 40 percent of the small businesses in America might close their doors forever by the end of 2020.
When a business cannot open its doors because of the pandemic, its revenues can plummet. Some expenses continue, like the rent on the shop you cannot use to sell your products or services to customers. You probably have questions about running a business during a pandemic and knowing when to call it quits. A South Carolina business attorney can guide you through the decision-making process and draft the documents you need.
The Vast Unknown
It is practically impossible to engage in business planning when you do not have all the facts you need. In this pandemic, your business might be struggling to determine answers to these issues:
- When the government will allow you to re-open your office or store.
- How long you will stay open until the next shut-down.
- What restrictions you will have to follow to re-open, and how those things will impact your business.
- How to keep your workers, customers, and yourself safe during the health crisis.
- How you will get enough revenues to keep your business going.
- Whether you can pivot your line of work into a COVID-19 related enterprise to generate income.
- What legal liability you might have if a worker or client gets sick.
Traditional business planning cannot function without answers to those questions, so we have to develop a new way of thinking about business viability in a pandemic.
Some Options for Staying Open or Closing
One of the first things to ask yourself is whether you want to stay in business. If you lost the passion for having your own business because you are nearing retirement, do not want to try to retrofit your company to the new economic realities during and after this pandemic, or lost a close loved one to COVID-19, you might want to talk to an attorney about wrapping up operations.
If you think your company has a future, you have some options for riding out this storm. Here are a few suggestions:
- The new Chapter 5 bankruptcy, also called the Small Business Restructuring Act, helps small companies with a quicker, simpler bankruptcy process. If your company has less than $2.73 million in debt, you can reorganize and keep the business in operation. The creditors do not have the option to veto the plan.
- Filing a Chapter 11 bankruptcy can help if you have a larger company. These bankruptcies cost more and take longer than a Chapter 5, but might be a good choice if your company owes more than $2.73 million.
- A Chapter 7 bankruptcy can wipe out your debts, but you could lose your personal assets. If you pledged your house as collateral for a Small Business Administration (SBA) loan, for example, a Chapter 7 might force you to sell your home.
- You can close your business without filing for bankruptcy if you have enough assets to pay off your debts or work out a deal with your creditors. Be sure to have your lawyer draft enforceable agreements.
- Think carefully about borrowing money to stay afloat in this pandemic. If your company will not have the resources to pay the debt when it comes due, borrowing money could be digging a deeper hole instead of helping you.
As part of your analysis, you might want to write a new post-COVID-19 business plan. You will have to speculate about several factors, so you might write up several “what if” scenarios. A South Carolina business attorney can advise you about bankruptcy, restructuring, and remaining viable during this pandemic. Contact us today.