Small Business Bankruptcy in Indiana Not Always Due to 1 of 7

April 21, 2012 1:07 pm Published by

“If you address the common reasons for failure up front, you’ll be much less likely to fall victim to them yourself,” Patricia Schaefer advises first-time entrepreneurs, listing “Seven Pitfalls of Business Failure and How to Avoid Them”.

Sorry, but as a longtime debt consolidation lawyer who’s helped thousands of entrepreneurs file small business bankruptcy in Indiana, I need to remind Bankruptcy in Indiana readers that, more often than you might imagine, the cause of business failure is something Schaefer totally left off her list.  I’m referring to what I call “the ripple effect”.

Every one of the good bankruptcy attorneys in Indiana who works in the Zuckerberg bankruptcy law offices has offered Indiana bankruptcy help to small Indiana business owners who made none of those seven most common mistakes.  These were entrepreneurs who had a plan and who worked that plan, and yet – their businesses failed. What “did them in” were negative forces beyond their control.

I’m in a position to know. With Indiana being home to hundreds of thousands of small businesses, and with me having over twenty-five years’ experience practicing Indiana bankruptcy law, I’ve seen a lot.  In fact, during the recent recession, I’ve watched the 25% annual increase in the number of small business bankruptcies filed in our state. I know all too well that high on the list of bankruptcy myths is the “myth of the corporate veil”. The myth is that, if a business is held in the form of a corporation, a partnership, or an LLC, that business is a separate legal entity from its owners and can file bankruptcy on its own without affecting the owners’ personal finances. 

That’s the myth.  Here’s the reality, as my colleague the Columbus bankruptcy attorney is constantly reminding her clients: The majority of small business owners never kept that veil intact, because, from the get-go, and out of necessity, they intermingled business and personal finances. 

I got a sharp reminder of the power of the “ripple effect” while reading about Ener1, which is an Indiana company with branches in Indianapolis, Noblesville, and Cumberland.  At one point Ener1 had big plans to hire 1400 people to make batteries for electric cars. Then the “ripple effect” hit, and in January  Ener1 filed bankruptcy in Indiana. What went wrong?

The recession, which brought a slowing demand for new cars, and in particular, electric cars, caused. Ener1’s biggest customer to file bankruptcy. Then, the failure of Solyndra, a California solar panel maker, cooled taxpayers’ willingness to offer big government grants to “green energy” companies. This month, Ener1 is emerging from bankruptcy, having changed its game plan to focus on commercial and industrial vehicle batteries.

Ener1 is not small business, but with small business bankruptcy clients,  many, many factors often combine to put pressure on business owners to file personal bankruptcy in Indiana along with small business bankruptcy.  Often, as an Indianapolis lawyer for bankruptcy, I’ll see entrepreneurs who, despite the recession, proved to be very skillful business managers, operating under a good plan in the right location.  Then, his spouse lost her job. An adult child needed financial help with overwhelming medical bills. A divorce happened. A key supplier or customer fell by the wayside. New regulations put a big and unexpected financial burden on the small business.

Precisely because I and all the Indiana bankruptcy lawyers who work with me know how very bitter a pill it can be for any owner of a small business to face failure, we offer consulting services to help those small business avoid bankruptcy, helping prioritize payments, negotiate with suppliers and creditors, and survive long enough to come out the other end.

But, just so you know, Patrica Schaefer, it’s not always one of those seven common pitfalls!

 

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This post was written by Mark Zuckerberg

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