Getting Started – Number 4

Operating a business creates a lot of financial information.  We know our business clients are put off by how much information we ask for.  We ask for it to help us focus on what’s important and what’s not, and to help avoid unpleasant surprises.  Here are some examples:

Businesses often have company credit cards to provide a simple way to pay and track expenses.  Sometimes owners use their individual credit cards to help keep a business running, or the card issuer required personal liability before issuing the cards.  We review credit card statements to assess who is liable and whether the company paid personal credit card debts, which could result in efforts to recover those payments from the individual owners.  We normally evaluate and plan for operating the business without credit cards after a bankruptcy.

One of the surest ways to have a business kicked out of bankruptcy court or liquidated by a trustee is a failure to have proper liability and casualty insurance.  We want to make sure such insurance is in place and plan for renewing or replacing it.  If the business has employees, worker’s compensation insurance is required to continue operating.  Other policies which may come into play during a bankruptcy are directors and officers (“D&O”) coverage and life insurance which is owned by or paid for by the business.  Insurance coverage can be an asset for creditors, an ongoing expense to budget for, or both.  Insurance premiums may be financed, requiring court approval to renew, yet businesses often forget to include the insurance premium lender as one of their creditors.

Employees create a host of legal and financial issues for businesses.  Employees are creditors if they are owed wages, vacation/sick pay or other benefits.  Such benefits could include health insurance premiums or retirement plan contributions.  A business or its owners/officers may have specific duties to employees when it comes to such payments.  We will ask for wage, insurance and retirement plan information to evaluate the impact on a budget and potential liability.  We will need to know if there are any pending or threatened claims by employees so they can be addressed in a bankruptcy.  Finally, we’ll help analyze how to keep employees during a bankruptcy, or how to reduce the number of employees without creating additional liability.

Next time: Utilities, bank accounts and litigation.

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