A New Business After Bankruptcy? Yes, It’s Possible!

Starting a new business post-bankruptcy will definitely be a challenge but it is not impossible. Hopefully you will have taken stock of your previous situations on that prior mistakes stay in your past. Securing credit will probably be your biggest issue. Some things to keep in mind when starting over are discussed below.

Do not enmesh yourself in a business. If you were previously a sole proprietor or a partner perhaps this time around you should consider a limited liability corporation structure. Such companies are legally separate entities and any debts incurred by such a business structure are not the responsibility of the owner(s). Just be careful about PERSONALLY guaranteeing a business debt. That liability will remain.

Tax ID numbers are necessary for any business. If you discharged business debt through a personal bankruptcy filing, or your previous corporation or LLC was part of a Chapter 7 filing, you will need new tax identification numbers. Beware though. Corporations and LLC's which open again are subject to previous creditors taking steps to recoup previous losses not paid in total.

Securing credit, as noted earlier, is going to be a challenge. Changing business structures will not preclude a credit history check. To make lending institutions more inclined to work with you consider (a) submitting a detailed business plan showing all contingencies, (b) partnering with someone else who has a decent credit rating, (c) securing private investors, (d) looking to small community lending institutions who wish to build up their local communities, (e) securing available grants/loans offered by communities looking to advance their business infrastructures. A note of investment caution is necessary here. Many people think seriously about turning to the SBA (Small Business Administration) for start-up assistance. Be advised that the SBA often asks entrepreneurs to personally guarantee proposed loans, including offering personal assets as guarantees.

Options to financing will depend largely upon the type of business endeavor in which you find yourself. If the above options are not viable, you could still operate your own business and be your own boss. Would you consider being a sub-contractor? Would you consider creating a personal service business? These businesses have limited overhead and operating costs.

Do NOT take any short cuts with taxes. Pay your business taxes on time and make sure it's the BUSINESS that is doing the paying. Your goal is to avoid personal liability. Ancillary to this are trust fund taxes. Those are taxes such as sales tax, payroll withholding taxes, etc. Pay these taxes on time and to the proper authority. Again, personal liability is to be avoided.

Do not get caught in the "making a name for yourself" by being the "nice guy" on the block. You are in business ostensibly to make money. You are not a bank or any other kind of lending institution. Get paid for the products/services you provide. Be very careful of offering overly generous payment terms to your customers which do nothing but extend your overhead and change the black to red in your accounting books.

And as far as accounting books are concerned, keep VERY COMPLETE RECORDS. If you were lucky enough to secure financing for your new business the odds are that it will be renewable, short-term while you are re-establishing your credit worthiness. You will need to show that working with you is in a lender's best interests.

Challenging? Yes. Impossible? No. There is a niche for the independent entrepreneur to achieve his dream even if there are bumps in the road.

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