One often overlooked advantages of living in the U.S. is the fact that the bankruptcy laws tend to be much more forgiving than other countries. This can be seen when it comes to starting a business as some countries don’t even let those with a bankruptcy open a bank account.
However, there are no such prohibitions in the U.S. and if you are looking to start over by starting a new business, then read on as this article will give you some pointers on how to make it happen.
Don’t Mix Accounts
Granted, you don’t need a bankruptcy to do this but if when you have a business you don’t want to mix your personal and your corporate accounts. Doing so can not only lead to an accounting nightmare but it might make it harder for your new business to establish credit and trade lines.
As such, get started by incorporating. The truth is that it has never been easier to set up a company and the new tax laws make it to your advantage to do so. By doing so, you will make sure that your company can establish the credit it needs to grow without you being the co-signer. Granted, this does not mean that you will be able to get a million-dollar loan for your new business but you will be able to open the trade lines you will need to operate.
Register for a Tax ID Number
Also known as an Employer Identification Number, think of this as a Social Security number for your business. Getting a new number is especially critical if your previous business was involved in your bankruptcy proceedings.
However, you want to keep in mind that businesses, unlike people, cannot be discharged from Chapter 7 bankruptcies. This means that if you reboot the business, then creditors might still try to act against you. While this shouldn’t happen, there is a risk and as such you will want to discuss this with your lawyer. If you are not sure where to start, then you might want to check out this site – https://www.getfreeofbills.com/chapter-7-bankruptcy-attorney/.
One thing that bankruptcy should have taught you is that things can change; sometimes rather quickly. While this can lead to a sense of uncertainty, you can harness this to your advantage. Part of this is knowing that you need to be prepared when things aren’t going as planned.
When it comes to your business, this means you need to keep an eye on two things. First, what is your cash position? Remember cash is king and having a good handle on where your company stands will be vital to your long-term success.
Second, you will need to have a plan to get small fast. Often this is how companies get into trouble as they assume the good times will last forever, and then live in denial when the market starts to turn. History is strewn with companies that thought they could weather the storm – remember Lehman Brothers.
Let’s face it, most banks are not going to welcome you with open arms just after a bankruptcy. However, this does not mean that you are completely cut off from getting the money you need for your business; it just means that you need to get creative.
This includes picking a business that does not require significant capital – including a home-based business or some sort of professional service business. You could also look at working as a subcontractor first – at least until your cash flow stabilizes.
Beyond this, you can look for a partner or seek outside investors and then there are always your customers. Maybe some will be willing to pay upfront for your product or service and this will help to offset the cost of getting your company off the ground.
Look Out for Minefields
One way people can get into trouble with your business is by not paying their taxes. Not only can this create problems with the IRS but you could also run into trouble with the revenue department in your state.
Don’t let this happen to you, make sure you keep clean records and that you file your taxes on time. Keep in mind when it comes to income taxes, you can carry forward the accumulated losses from starting your business. As such, it pays to keep track of your taxes.
Be Very Careful of Giving Payment Terms to Customers
It’s a competitive market and customers have choices. However, you want to be very careful of giving payment terms to your customers as this can come back to haunt you – especially if the economy turns. Remember, cash is king and if you are starting a business after bankruptcy having cash in the bank is more important than being owed $1,000,000 from your customers.