Everyone has that entrepreneurial dream in this country. Who hasn’t thought about how nice it would be
to be their own boss, set their own hours, and really carve out the beginnings of their financial
independence by following their own dream?
Striking out on your own takes a lot of courage; the Bureau of Labor Statistics show the sickness of small business bankruptcy afflicting one of every five small business in their first year alone, and of those that do survive have climbing odds of failure reaching a frightening fifty percent by their fifth year of operation. You might be thinking that this is just the regurgitation of some small business website trying to act like an expert, but I don’t a publication to tell me about the perils of small business bankruptcy. I know small business bankruptcy; I’ve experienced it firsthand four times.
When I say firsthand, really I should say first-and-a-half-hand. Growing up, my parents started a number
of small businesses. Three of them failed. The stress and pressure from the last small business bankruptcy
almost ripped their marriage in two. All the fighting, screaming, door-slamming was bad enough, but on
top of it we had to deal with lawyers, accountants, the State Secretary’s office, and eventually go before
the judge a few times. Needless to say, growing up with that image of what the risk is to make a small
business, I am perfectly content to work for someone else.
Of course, that isn’t to say my parents didn’t make a few mistakes. Most people when striking out on their
own business usually aren’t able to obtain floods of investment capital, so they usually go the self-funded
route, much like my family did. The trap always makes them think they will be able to make back their
own personal investments once their business turns a profit, but many small business bankruptcy starts to
take root here. Some try to mitigate the potential loss by applying for bank loans in the name of their
LLC, but some form of guarantee is still needed. My parents did it all, and in the end sank their entire life
savings in the business.
The small business was bankrupt, and so were they on the verge of declaring. Loans they had taken out on
the business’s behalf after its own line of credit was up kept coming closer and closer to default. Darkness
looming, but there is actually light at the end of the story. As a result of their hearing, the judge had ruled
the debt they incurred strictly on behalf of their business was able to be attributed to the LLC, saving my
parents themselves from bankruptcy. It was a huge sigh of relief for everyone; the judge understood and
ruled not just by the law, but by how the lives of everyday people with pure gumption temper how the law
is to be interpreted. There is even more of a happy ending of this small business bankruptcy horror story.
My family went back to work, and tenacious as ever (the gluttons for punishment) started yet another
small business! This time, though, it has been a total success, and still is churning out tens of thousands of
dollars a month for the past few years.
The moral of the story is don’t be afraid to take that chance, strike out on your own if you so want, but if
you do, be sure to understand exactly what can happen, and likely will happen. Oh, and always talk to
your lawyers before striking out on any venture. Keep them on speed dial for whatever comes up. Best of
luck, and I hope you never have to go through a horrible small business bankruptcy yourself.