Restructure or do nothing? Taking action now may save your business

Building a business takes an enormous investment of time, money and passion. So when their venture gets into financial trouble, it can be hard for business owners to acknowledge the problem.

Some choose to do nothing and try to run their business as usual, even as the bills continue to pile up. Others may just cease operations altogether and walk away from the business, without taking the legal steps needed to close down a company.

Ignoring the problem will not make it go away

Whether you go on as if it’s business as usual or decide to just stop operations, you’ll likely end up incurring more corporate and even personal debt. For instance, if you stop running your business but don’t close down the corporation legally or go into formal insolvency, you’ll still be required to file all the necessary tax returns – even years after you sold your last product. This means you’ll continue to incur the higher costs of filing corporate returns and will likely face penalties from Canada Revenue Agency.

At the same time, the pressure and stress on you, your partners and any remaining employees will only get worse.

Start with the first step: Know your options

So what are the steps that you can and should take? Start with the first one: find out what options are available to you. Depending on your circumstances, these may include:

• Restructuring your company. Changing your management and employment structure, or your business model and processes, could help turn your business around. It may even make sense to close down certain locations so you can take a more focused approach to boosting sales and profits.
• Securing a loan or investment could allow you to put some money into marketing, or even make it possible to achieve economies of scale by ordering products in larger volumes.
• Proposal or bankruptcy. If your business is unable to pay its debts, a Division 1 proposal or even bankruptcy may be the best option for you.

Bring in the restructuring professionals

Seek the help of a restructuring professional or licensed insolvency trustee who can guide you through your options and look after critical tasks such as filing tax and payroll returns, as well as legally closing your corporation. A restructuring expert can also help you bring your business back to life by analyzing your finances – including your cash flow – streamlining business processes, and even working with your management team, employees and suppliers on a turnaround strategy.

While it may be tempting to try and save money by doing this yourself, keep in mind that your lack of expertise in these areas could lead to costly mistakes. In times of crisis, it’s best to bring in experienced professionals.

Act now and avoid additional costs and stress

While you do nothing, interests and penalties will continue to add to your debt, making it even harder to manage and resolve. On the other hand, if a proposal or bankruptcy is the best option for you, once your licensed insolvency trustee files the appropriate documents to declare your business insolvent, then your creditors can no longer charge you additional interests and penalties. Just as importantly, the collection calls and letters will stop and you can, finally, start to focus on rebuilding your future instead of worrying about your past failures.