Filing for Bankruptcy as a New Jersey Business Owner

Starting and running a small business is a very challenging endeavor, even for the most business-savvy entrepreneur. In fact, most entrepreneurs start a number of businesses before they find one that takes off. Sometimes, a business venture simply doesn’t pan out, no matter how much effort you’ve put into it.

If you’ve started struggling to pay your business lease every month – now’s the time to really start considering your options before problems begin to surface in your personal finances as well.

When your business debts have become more difficult to manage but not out of control, you may be able to salvage things with some refinancing and debt negotiation. On the other hand, if your debts are virtually unmanageable and you see no light at the end of the tunnel, filing for bankruptcy may truly be your best choice.

As a business owner, should I file for chapter 7 or chapter 13 bankruptcy?

Whether you’re filing for bankruptcy on your own or as a business, you can file for either chapter 7 or chapter 13. In both cases, you’ll have to meet certain qualifications in order to file. For example, the only instance in which you’re permitted to file chapter 13 in New Jersey as a business is if you are a sole proprietor. Corporations, partnerships and LLCs (Limited Liability Company) are not eligible for chapter 13 bankruptcy.

You can, however, file for a personal chapter 13 bankruptcy at this time, even if your business doesn’t qualify for chapter 13. In doing so, you’ll be able to keep the business assets while you repay debts through what is called a reorganization plan. This is the best bet if you want to continue running the business after you file for bankruptcy. This option may be appropriate if you made some mistakes along the way that you have now remedied, making it more likely that the business will succeed. If you don’t meet the requirements to file for chapter 13, your business may qualify for chapter 11.

Any business entity has the right to file for chapter 7 bankruptcy. If you the sole owner of the business, you will also be required to file for a personal chapter 7 bankruptcy simultaneously. This is due to the fact that sole proprietors are legally the same entity as their business. Additionally, a business that files for chapter 7 will not receive a discharge of their debts.

Again, if you wish to continue operating the business after the bankruptcy, you’ll want to file for a personal chapter 7. This will wipe out your liability for said business’s debts, which may allow you to get a better hold on things and start over with less debt overall.

If your ultimate goal is to close up shop and move on to greener pastures and your company is a partnership, LLC, or corporation, you can file for chapter 7 as a company. In doing so, you will essentially turn over all of your business assets to the bankruptcy trustee to be liquidated. This means all of your business property will be sold in order to pay back the debts you accrued that you couldn’t repay.

For more information on filing for bankruptcy as a business, request your free case evaluation at the bottom of our website’s home page. Veitengruber Law can help you determine which NJ bankruptcy is right for your unique situation.

 

Image: “Store Closed” by Chris Chan – licensed under CC 2.0

Better Networking Strategies for the Modern Small Business Owner

Every small business owner recognizes the importance of networking. You can’t be an entrepreneur today and not hear or read the buzzword “networking” at least several times a day.

However, this doesn’t mean that every small business owner is equally adept at reaching out and working the circuit. If you need help or ideas when it comes to your personal networking plan, you’re not alone. Networking can be one of the more challenging aspects of owning a business because it involves stepping out of your comfort zone.

Difficulty level aside, reaching out to other entrepreneurs is a crucial part of how successful your small business can be. It’s a great way to generate leads which can increase your customer base, and it can also help you to learn and grow as a person and business owner.

Give the following networking tips a try – you might be better at networking than you thought!

Focus on forming relationships

Instead of going into the networking process with the mindset of striking a deal at every turn, commit to the concept of forming friendships with other like-minded entrepreneurs.

The traditional approach to networking through formal meetings and conferences can still be effective ways to hook up with other business owners, but you should also constantly be thinking about making authentic contacts as you move through your workday. You never know who may end up being your next great connection.

Knock the pitch out of the park

No matter where you do most of your networking, you have to make an incredible first impression. With only seconds to impress upon someone why they should want to continue connecting with you in the future, have an elevator pitch prepared and ready to go at a moment’s notice. Naturally, work on honing your go to introduction so that it sounds less like a pitch and more like a good reason to get to know you better.

Be honest about your intentions

Even as you work to change your mindset towards building relationships that last, leading with honesty is always the best policy. If you’re looking to expand your company‘s reach into a new geographic area, a good tactic can be reaching out to friends of a friend. Reveal your motives as you give your elevator pitch and then quickly transition into committing to the “slow burn” of long-term relationship-building.

Use social media

Small Business Trends Magazine reports that, as of November 2016, 97% of adults who use the Internet either utilize or visit a social networking site regularly. The most popular social networking sites include: Twitter, Instagram, Pinterest, LinkedIn and Facebook.

Cyber-networking has actually proven to be quite successful and prosperous for many modern small business owners. Connect online with local entrepreneurs in your industry as well as those who may complement your business. Often, online connections can prove to be as fortuitous in business as they are in romantic comedies.

Leave an impression (and your contact info)

As you work to grow your networking circle, remember to always have plenty of business cards on hand. Even if you make a lasting impression, it will mean little if your new connections don’t know how to contact you. Many business owners today still favor traditional business cards, while others have transitioned to the digital business card. It’s a good idea to be familiar with how to create, share and exchange the more modern e-business card while still carrying paper business cards, so that you are prepared for the preferences of anybody you meet.

 

Image: “Cheers” by Jakob Montrasio – licensed under CC by 2.0

How to Start a NJ Business When You Have a Poor Credit Rating

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If getting out of corporate America by becoming your own boss is your main goal as we roll into 2017, there are a lot of steps you’ll need to take to make it a reality. Starting your own business is without a doubt a challenging undertaking, but it has been done by many before you, so take heed that it can be done! However, if you’re starting the process with a low credit score, you’re already a bit behind the eight ball. Rest assured, though, that this does not mean entrepreneurship can’t happen for you.

Facing the fact that your credit score is less than ideal can be difficult, especially if you’ve managed to “get by” for years without giving it too much thought. By taking no action at all and simply burying your head in the proverbial sand, your score will never improve. Since starting a business is important to you, you’ll have to make smart borrowing choices that will enable you to launch while increasing your credit score simultaneously. In turn, you’ll have access to more financial resources later when your business expands, because your score will have gone up. It is more important to have a good credit score as your business grows, so you have that on your side. You’ve got nowhere to go but up!

In order to get your business off the ground, try these approaches to getting the start-up cash you’ll need:

  • Phone a friend. If you’ve ever watched an episode of Shark Tank, you’ve probably noticed that many of the entrepreneurs on the show report getting a large percentage of their start up costs by asking friends and family for loans (or investment in the company). While it may be difficult to ask loved ones for financial help before you have established your new company, this is one way you can avoid your low credit score prevent you from borrowing money.
  • Apply for grants. Although it can be very challenging to find a grant program that is willing to donate money to your new start-up, it is possible. This is especially true if your company is in the healthcare field or is a retail business in a struggling geographical location. Downtrodden areas with lower-income residents are frequently looking for new businesses to give a boost to their current economic status.
  • Look for a microloan. It is what it sounds like – a tiny loan, but if you have exhausted all other options, something is better than nothing. Lenders that are not affiliated with a bank do exist, and for many of them, their main purpose is helping entrepreneurs with low credit scores. Not only are they more likely to lend you money than a traditional bank or lender, but borrowing from them will also cause your score to rise! Naturally, that will only occur if you’re making your required payments on time, but with microloans the payments will be much more manageable.

The most important thing to remember if you dream of starting your own business is this: don’t give up just because of a low credit score. Today’s society revolves around the buying and selling of goods and services – now more than ever before!

Additionally, for those who are contemplating starting a business in New Jersey – our state welcomes you and wants to help you find the resources you need to succeed. More business in the Garden State means a better NJ economy! To learn more about special financing and incentives available to you, visit The Cornerstone of Financial Justice, where you’ll receive full service solutions to your credit score and business loan challenges.

 

Image credit: CCPixs

Can I File for Bankruptcy if I’m Self-Employed?

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If you are currently employed in New Jersey, you’re either considered a traditional “W-2 employee” or an independent contractor. If you report to the same location every day where you work on tasks assigned to you by your boss or other superior and you receive a paycheck (typically) every two weeks from the payroll department, you’re an employee.

On the other hand, if you provide services for clients without taking direction from anyone and clients pay you directly – you are an independent contractor. Sometimes independent contractors are referred to as freelancers or “1099ers”.

Both categories of workers described above are required to pay income taxes and file yearly tax returns at the state and federal level. Traditional employees will be given a W-2 form by their employers. The W-2 form explains how much of an employee’s salary was withheld and used to pay income taxes. It is very useful when filing taxes, as it tells the employee exactly how much they still owe in taxes for the year, or how much they overpaid, which will be paid back to them in the form of a refund.

If you’re an independent contractor, you don’t have an employer to keep track of your income and tax withholdings. It is your responsibility to maintain accurate income records and make either estimated income tax payments in quarterly installments or one lump sum income tax payment at the time that you file your tax return.

Just as filing income taxes is more complicated if you’re an independent contractor, the same is true if you plan to file for bankruptcy. In fact, a major determinant of whether or not you will qualify to file for bankruptcy is your income. You will be asked to accurately report your income on your initial bankruptcy paperwork regardless of your employment status.

Although it will be more difficult to accurately prove your income as an independent contractor, it is most definitely within your rights to file for bankruptcy. You simply have to be more diligent about providing proof of your income. Falsely representing your income in a bankruptcy proceeding (even accidentally) is reason for dismissal of your case.

Today, many people work as freelancers all around the world, and technological advances in banking have made documenting your independent income totally plausible. If you have clients who pay you using a variety of payment methods, you can report your income by providing a copy of your bank account statement. It is imperative that you maintain a separate bank account where all of your income will be deposited.

Regardless of how your clients pay you (paper check, PayPal, Square Up, etc) – make sure that you then deposit that money immediately into a bank account that is designated for income. Do not deposit any money into that account that isn’t income from your job as an independent contractor. That makes filing your taxes, and in this case, filing for bankruptcy, much easier because there will be a record of all of your income.

Standard employees and freelancers alike all have to pass the New Jersey Means Test in order to be approved to file for bankruptcy. Filing for bankruptcy as an independent contractor adds a level of difficulty into the process that could easily cause you to make fatal mistakes that can result in dismissal of your case.

Talk to a New Jersey bankruptcy attorney before you file any paperwork on your own. Even if you simply take a free consultation (offered by many attorneys), you will walk away with valuable information and the understanding that, instead of being unable to afford an attorney, you actually can’t afford to proceed without one.

Image credit: Ray S.

Can I Discharge Business Loans in a Bankruptcy?

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Knowing that a large percentage of your personal debts can be discharged or forgiven by filing for bankruptcy, many business owners  wonder if the same would be true for loans they took out to start a small business.

Unfortunately, nearly all loans taken out by any small business will have been guaranteed by the owner(s) of the business. Lenders do not typically grant loans to new small businesses without the personal guarantee of the company’s owner(s). Therefore, even if you do file for bankruptcy for the loans you took in order to get your business off the ground, you will still be held personally responsible for the repayment of the debt(s). Because of this, filing for small business bankruptcy in order to recoup your initial business loans will not be very effective.

Another faulty belief held by many new business owners is that an incorporated business will mean protection for the owner(s) if the business fails. The reason why this belief is faulty is because, as previously mentioned, most small business owners are required to guarantee any loans they take out for their start-up. Anyone who has personally guaranteed the loan(s) s/he took in order to specifically start their business will not find any protection in incorporation.

Filing for bankruptcy for a failing business usually does not offer a whole lot of help to the business itself. Bankruptcy discharges aren’t even granted for businesses that are closing their doors. Therefore, if your business just isn’t going to make it, don’t waste your time filing bankruptcy paperwork for the business itself. YOU are the person/entity who will need protection, so you should consider filing a personal bankruptcy and attempting to discharge debts related to your business. These kind of debts can typically be discharged in an individual bankruptcy matter.

On the other hand, if you think that your business is going to survive and (at some point in the future) thrive, but you are just having some temporary trouble keeping it afloat, a business bankruptcy may help protect it from going under. It should be noted here, though, that most small business that file for bankruptcy do not make it through to the other side with their doors still open.

Filing for bankruptcy for your small business can give you time to reorganize your business finances and debts. As a business owner who would be able to stay in business with a reconfigured budget and restructured debts, there are two bankruptcy options. Both Chapter 11 and Chapter 13 bankruptcies allow businesses to stay open by organizing a more realistic financial plan for the business owner(s).

Both Chapter 11 and 13 bankruptcies offer you the ability to maintain ownership of any business properties. In order to do so, you’ll be required to sell any unnecessary assets for profit, to help you pay down your existing debts. Additionally, your secured business debts will be modified to make the payments more realistic for your budget.

Where possible, it is advised to file for Chapter 13 bankruptcy if you are the sole owner of your business and if you meet the debt limitations required under Chapter 13 bankruptcy law. It is a less expensive and usually much faster option to file Chapter 13 instead of Chapter 11. However, if you do not meet the eligibility requirements for Chapter 13, you can file under Chapter 11. No debt or income requirements/limits exist regarding filing for Chapter 11 bankruptcy, but as mentioned, it can be expensive and time consuming.

You can learn detailed information about your particular bankruptcy needs by working with a NJ bankruptcy lawyer near you. Each case is unique, and your attorney will review all specifications relating to your business and debts in order to best advise you about your options.

Image credit: Bradley Gordon

If I File for Bankruptcy, Will I Lose My Business?

Aged Come In We're OpenIf you are considering filing for a personal bankruptcy in New Jersey and you are a business owner, the biggest question on your mind has got to be, “Will I be able to keep my business?”

After all, your business is your livelihood and likely provides you with your income, so many business owners who incur personal financial troubles wonder how they will be able to provide for themselves and their families if their business goes under due to filing for a personal bankruptcy.

If you are filing for a Chapter 7 bankruptcy, whether or not you will lose your business largely depends on what type of business you own. If you are a sole proprietor, you may be forced to shut down your business (hopefully only temporarily). This needs to happen so that the bankruptcy trustee can fully evaluate the value of your business and if any of your business assets qualify for exemption. This process may take several months, but after that you may* be able to reopen your doors.

Those sole proprietors who have no assets, such as freelancers and consultants, most likely will be allowed to continue working because they have a low risk profile of incurring further debt.

If you are part owner of a partnership or LLC (Limited Liability Company), the trustee will most likely be prohibited from taking any assets from the business because it will affect the other members/partners. However, your percentage of the profits earned by the partnership or LLC will be taken into account in your bankruptcy, and the trustee will be able to take any of your profits in order to pay off your debts. Sometimes, partnerships or LLCs will require you to bow out of the company before filing for bankruptcy. If you signed an agreement to this effect, you could be sued by the other owners if you file for bankruptcy while still involved with the company. This is a very important detail that you must examine before beginning the bankruptcy process.

In order to avoid these difficulties, it is a good idea to set up your business as a corporation. This means your business will be considered a legal entity and you will have a share in the corporation. During a Chapter 7 bankruptcy proceeding, your share of the corporation will become property of your bankruptcy estate, however, you will be able to repurchase your share of the business after your bankruptcy is finalized.

Forming a corporation will allow you to file for bankruptcy without dragging your partners down, because they will also be shareholders in the business, and their shares will be unaffected by your personal bankruptcy.

Another option is to file for a Chapter 13 bankruptcy rather than Chapter 7. A Chapter 13 bankruptcy reorganizes your debts in such a way that they are much more manageable for you to repay. A Chapter 13 will allow you to retain possession of your business assets – which will in turn allow you to keep your business doors open without any worries. You will not be able to discharge your debts, but they will most likely be significantly reduced.

The bottom line regarding filing for personal bankruptcy when you also are a business owner is to work closely with a NJ bankruptcy attorney who has experience helping business owners get their finances back on track without losing their business in the process.

Image Credit: Czarina Alegre (Flickr)

Paying Taxes When You’re Self-Employed

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It can definitely be confusing when tax season rolls around if you are currently working as a 1099 contractor, or in other words, if you are self-employed. If you have been working from home – either on your own business or as an independent contractor, you do still have to pay income tax, as long as you’re actually generating an income. The tricky part is, now you are considered to be the employer and the employee.

Most 1099 contractors love the flexible work schedule and increased amount of independence that comes with being self-employed. However, one of the negatives that unfortunately also comes with the package deal, is figuring out and managing to pay your own income taxes properly and on time.

After all, no one wants to get in trouble with the IRS.

Just like a W-2 employee, your income taxes as a 1099 contractor will be determined by how much you earn per year. You can pay your taxes electronically or the good old-fashioned way: by mail.

The first thing you’ll need to do when determining how much of your wages to fork over to the government, is to add up all of your yearly income. Be sure to include all payments you have received from any and all clients throughout the entire preceding calendar year. The nice thing about working independently, is that you can then deduct business expenses and tax credits from your gross earnings. You can deduct virtually anything that you use to help run your business, ranging from the supplies you use on a daily basis and office furniture in your home to any expenses related to traveling for your business. Another nice bonus of working for yourself, is that you can actually deduct part of your mortgage payment if you have a home-based office.

Next, you should also know that as an independent contractor, you will be required to pay something called a Self-Employment tax, or SE tax. This is because you no longer have an employer taking money out of your paycheck to go toward Social Security and Medicare.

By using form 1040-ES, you will be able to determine whether or not you are required to pay your SE taxes, as well as your income taxes, quarterly, or if you can simply pay them once per year.

After filling out the worksheet attached to form 1040-ES, you will know your estimated quarterly tax payments. Included with form 1040-ES are blank vouchers that independent contractors can use when sending in quarterly tax payments to the IRS. Remember, you can also pay quarterly using the IRS’s electronic payment system.

Even if you pay your SE and income taxes on a quarterly basis, you will still be required to file an annual return every year. This is because most sole proprietors estimate their quarterly income. Your annual report will show the IRS your actual earnings for the entire year so that any corrections may be made to the quarterly payments that you have submitted.. To file your annual return, you can use the Schedule C form, found on the IRS website.

Filing your taxes as a sole proprietor or 1099 contractor can be confusing, especially if this is your first year in business for yourself. By using the tips in this article, you should be able to successfully handle filing the appropriate forms and making the correct payments.

Should you need further assistance, we can easily direct you to a trusted tax preparer within our vast professional network. It’s as simple as leaving a comment after this post, sending us a quick note using our Contact Us form, or calling/dropping by our office. As always, we’re happy to help!

Government Shutdown: What it Means for You

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Photo courtesy of Bryan Mills

Here at Veitengruber Law, many of our close friends, family members and dear clients have been negatively affected by the Government Shutdown of 2013. The most amazing thing about the shutdown is just how far-reaching its effects truly are.

Naturally, if you’re a federal worker, you’ve most likely been furloughed for what may be a second time in as little as five months’ time. This group of employees is undeniably the hardest hit, given how much of their paychecks have already been withheld this year. Thankfully, The House of Representatives has voted to issue back pay to those workers who’ve been furloughed. That is, they’ll be paid, just as soon as the government reopens. When that will be is still a mystery.

In an effort to prevent the shutdown from causing  an internal collapse of important military systems like health care, family programs, training, commissaries, acquisitions, contract logistics and supply chain management, certain Department of Defense civilians have already been called back to work. Still, this leaves tens of thousands of government employees out of work and without a paycheck.

If we look slightly beyond those directly affected federal workers, it quickly becomes all too clear that the government shutdown has initiated a domino effect – and it’s already moving and gaining speed toward non-federal workers.

One group of Americans that has been told “not to worry” are those who receive Social Security benefits. Social Security payments will still be issued. Oh, but they may or may not be issued on time, due to the decreased number of processors working at the moment. Same goes for unemployment checks. Hopefully there are a lot of understanding landlords and mortgage companies; otherwise, that’s going to add up to a lot of late fees and potential evictions or foreclosures.

Small business owners are reporting a dramatic decline in their profit margins – especially those businesses that provide goods or services to the government or its employees. Applying for a federal loan to help them continue to pay their employees isn’t an option because there’s no one in the office to process new applications. Recently disabled Americans can also forget about sending in their Social Security Disability applications because they are currently not being accepted either.

If you’re currently furloughed and looking for some inexpensive ways to fill your suddenly free schedule, remember that all national parks, historic buildings, museums, monuments and zoos are currently closed because all of their workers are also sitting at home, just like you are. (Don’t worry – enough employees were retained to feed and care for the animals.)

You might be better off rummaging through your old junk and selling some of it on eBay. The postal system is still up and running, so it’s inevitable that bills will soon be arriving in your mailbox like clockwork. Gotta make ends meet somehow.

If you’ve got a tough creditor that simply won’t give you any slack while you’re furloughed, give my office a call. Veitengruber Law can take a look at your situation with you and tell you what your options are in this difficult time. There are things you can do – just make your move before the last domino falls down.

Protect Your Business from 4 Common Fraud Sources

5621813850_e45e5522e6Photo courtesy of Orange Sparrow

The news media is flooded on a regular basis with tragic stories about the victims of consumer fraud. On the flipside are the businesses that are also being taken advantage of – typically smaller to midsize companies with a lack of formality that is standard in larger corporations.

If you are a small business owner, you need to be aware that the number of fraudulent crimes against businesses are indeed increasing. In fact, 88% of small to midsize businesses in the United States have reported at least one instance of fraud. These companies have also shown to have a decline in their overall financial success, which makes the case for taking a closer look at what you can do to stay safe.

In order to safeguard your company from becoming a fraud victim, become more informed by taking steps to educate yourself about potential fraud sources and how to protect yourself and your business.

Insiders – Especially in small businesses, the relationships between business owners/bosses and employees is different than in large corporations. Because small-business owners typically entrust their employees to a fault, they unfortunately put their businesses at risk. In a 2009 survey carried out by PriceWaterhouseCoopers, 76% of business fraud was performed by employees or someone who was an insider and familiar with company procedure.

Clients/customers – Theft is the most obvious source of fraud committed by customers, but there are actually many other ways in which clients and customers can perform fraud against a company. These include: using stolen credit cards, writing fraudulent checks, false return scams and false injury or ‘slip and fall’ claims.

Vendors/contractors – All too often, small-business owners are grossly overcharged by contractors for services, and many times, the services in question were either sub-par or not provided at all.

Hackers – Today, electronic fraud in the form of hacking, identity theft, phishing and other forms of data breach crimes are some of the most problematic cases of fraud occurring against business owners because the hackers are often very good at what they do, which means they are undetectable.

In order to protect yourself and your company against these and other types of fraud, we advise our clients to adopt stricter anti-fraud practices within the workplace. First and foremost, you must provide your employees with a safe and anonymous system in which they can report their suspicions if they have a reason to suspect another employee or insider of committing a fraudulent act. Anonymity is key, because co-workers do not like to rat each other out.

It’s a really good idea to randomly surprise your employees with unscheduled internal audits and every so often, hire a professional team to externally audit all of your business accounts and inventory. This will keep your employees on their toes, and will reduce temptation to commit fraud. Ensure that your business has clear written policies when it comes to any type of money handling.
Tighten up your hiring policies by performing strict background checks on any potential new employees.

If you feel that you have already been a victim of small business fraud, please contact our office today so that we can assist you.  Don’t let fraud fall by the wayside – take steps to rectify the problem now so that your company can continue to thrive.