Colorado Small Business in Trouble

Summary:  If your Colorado small business is in trouble, get some help as to what to do with it.  If you are able to continue the business, learn how you can keep your business equipment and keep your creditors on hold while you reorganize.

Colorado Small Business in Trouble

In many cases, if your small business is in trouble, you can continue operating it by cutting expenses and increasing your marketing.  And especially if you are in construction (such as a sub-contractor) or in real estate, you should try to continue to operate your business because it is very difficult to find a related job in Colorado in 2010.

A Proprietorship is Your Best Choice of Operation if You Are in Trouble

Because all of your small business equipment and other assets are exempt from the reach of creditors in Colorado (some limits) if you are operating as a proprietorship, your best choice of business operation if you are in trouble is a proprietorship.  The reason is that the business equipment exemptions are personal to you.  The only way that you can use your personal exemptions is to operate as a proprietorship (and in some cases as an LLC.)

A Single Member LLC Taxed as a Proprietorship May be Treated Differently

Compared to a corporation, you may have an advantage if you are operating as an LLC (limited liability company) which is taxed as a proprietorship on Schedule C.  The reason is that your business equipment may be protected the same as if you operated as a proprietorship.  In other words, an LLC may be your best chance to keep your business equipment and continue your business.

Equipment in a Corporation and Mult-Member LLC Is Usually Not Exempt From Creditors

If you are operating as a Colorado corporation or mult-member LLC, usually the business equipment that is owned by the business (based on your accountant's recommendation) is subject to loss to the business creditors or in your personal bankruptcy filing.

In other words, your corporate business may be terminated by creditors or by the Chapter 7 or Chapter 13 bankruptcy trustee because the business equipment will be sold to pay some money to creditors.

The reason is that you own the business stock, not the equipment.  The equipment which is owned by a corporation is not exempt.  Your business stock (which is what you own) is not an exempt asset.

Get Some Professional Help by a Competent Colorado Attorney

You likely have to keep your business equipment if are to keep operating your troubled business.  You must do some planning or you may lose your business equipment to either the business creditors or a bankruptcy trustee.

Also, you should know that in most cases there is no advantage to a bankruptcy by your small business.  Usually a business-related bankruptcy is filed at the personal level, not at the business level.  The reason is that businesses do not get a discharge of debts.  However, there are exceptions, especially if your business has been sued.

IRS Form 941 Taxes Must be Dealt With

If your business owes payroll taxes (usually called 941 taxes), you have to do some planning to pay those taxes.  Usually you can do an installment agreement. Usually 941 taxes have to be paid.