Welcome back! We know our business clients are put off by how much information we ask for. We’re not looking for more paper to sift through; we’ve just seen how what we don’t know can jump up and harm our clients. Here are a few more examples:
Businesses enter into a wide variety of lease agreements or similar contracts. They could include real property, minerals, equipment, vehicles, even software. You may be able to end a lease in bankruptcy, or transfer it to someone else without the landlord’s consent. You may have to honor lease terms during a bankruptcy if you want to keep the lease, and you must also “cure” defaults to keep the lease. Sometimes leases are not leases at all, but financing agreements. You have different options depending on what the lease and the bankruptcy law says, including options you probably never thought about.
We want to see the last two tax returns for a business. Not just income taxes, but any taxes the company pays (or should pay). Beyond obvious information on income and expenses, we learn about tax problems or benefits and how big a role taxes will play in any workout or bankruptcy. We learn a little about any accountant the company uses and assess whether selling assets would be better inside or outside of a bankruptcy. It’s important to know that having delinquent returns can lead to a bankruptcy being dismissed. It’s also important to know if there are any tax liens, since they usually give the tax authorities more negotiating leverage. We have yet to find a business that enjoys complying with the tax laws, but bankruptcy can be a viable solution for keeping a business going when prior taxes have accumulated to the point where they threaten the ability to operate.
Next time: company financials and property transfers.