Has Anyone Had a Business That Failed?

My in-laws business closed (I was their only full time employee). They didn't tell me all the details (I'm not even sure they understood everything).

They did have issues with how they used their 401k money with the IRS. They went through the proper channels with lawyers and retirement companies, and somebody had missed something. They ended up claiming bankruptcy (I believe 13). They were able to keep their house and car that was already paid for. They did have to jump through hoops and have some of their more expensive items (jewelry and car) appraised.

They also had to stop using all their credit cards and stop using money in the bank account that was loan money. My FIL didn't quite understand this was surpised when he got a tongue lashing from his attorney.

No matter how you go about dissolving the business, make sure you have people who come well reviewed and recommended and use specialized attorneys, etc.

It took them about a year with some serious anxiety (do to some of my FIL's mistakes, bad advice from attorneys, and a company that did some wrong things with their 401k money).

Remember, there is no shame in this. Just do your homework even when you just want to wish it all away. You will come out in the end and it will be quite the education.

Best wishes to you and your employees.

Updated

My sister's business failed last year. They closed it up - her husband went back to the job he had 10 years ago and she looked for a job. They sold their house (were not underwater so they were able to use the cash from the house to move) in FL where the business was and moved back to VA. They are a bit depressed about housing now since they can't afford the house they had when they had just gotten married, but they both have jobs and are in a nice rental and working towards building their savings. Overall,, they are okay. Hang in there and keep the big picture in mind. You'll get through this too.

The sad fact is, most businesses DO fail. They are under-capitalized, under-marketed, or they suffer in a difficult economy. This happened to my father-in-law's business (snowmobiles & go-karts) during the 70s energy crisis.

There is no shame in it.

There is, however, considerable anxiety. Using savings to finance a business is risky but often the only option that people can think of. Of course, when businesses fail, then you are left with nothing - which is where you find yourself. If you can get good counseling from an attorney and good advice, you can get through it.

There are many options for credit counseling and also help with mortgages, plus tax options. Be sure you are exploring everything with a qualified business or bankruptcy attorney.

Another option people don't often think about is turning to their elected representatives. There are often state or federal programs available to help people - whether it's low-cost medical insurance or mortgage restructuring. Remember that your state senator, state rep, and Congressman/woman work for YOU (whether or not you voted for them), and their staff people can be extremely helpful in connecting you with programs.

My father-in-law's lawyer advised him to pay himself a salary even as the business was failing - that enabled him to have a salary on record which helped when applying for unemployment. That's one thing to ask your attorney about.

Good luck and hang in there.

This didn't happen to me, but it did happen to my dad. It was a lifelong dream of his to open his own business. He gave himself a 5-year limit...if he wasn't profitable in 5 years, he would close up shop. Well, he got his 5 years. Now he works at Carmax and is very happy. I know it's scary, you no doubt put a lot of yourselves into the business. But on the brighter side, maybe you can have your life back now! Of course everything will work out in the end, focus on working with your husband to get through this together; make a list of "what can we do now?" and try to see the big picture--hopefully you have your health and your family is stable. I'm not trying to sound trite, I know it was rough on my dad when his business couldn't make it. But was really REALLY rough was that my mom was unsupportive. That's why I'm saying to emphasize the power of you and your husband as "in this together."

M.,

I just wanted to say that I hope that things work out well for you and your family. I know how tough it is and its very unfortunate. Thinking and sending good thoughts your way....

M

I am so sorry that you are going through this. I am a partner in a business that is on the brink. Every month we struggle to pay the bills. I am so stressed. I haven't been paid for April yet. Took a salary cut, at the same time my husband's income dropped to almost nothing (he's in a related business) and we had to cash in insurance policies, take a second mortgage on the house (not for the business, just to make ends meet) etc. The advice to keep an eye on the big picture, what you do have, is good. I will try to do so too!

My husband did. Monetarily, we are still paying on the credit card bills but he found a good job afterwards, so we were fine. Psychologically, it took a tremendous toll. I still think he second-guesses himself on the decisions he made when he had the business. He also accuses me of not being supportive enough during that time.

I would suggest counseling when the dust clears--the sooner, the better.

Tavis Smiley wrote a book that literally just hit the stands last week. It is called "Failing Up". It directly addresses the same issue that you and your husband may be dealing with. I just purchased the book myself while rode traveling to pick my son from school in Rhode Island. I hope this helps.

I am sure all business failures are very, very different. In my husband's business failure legal action would not have helped any side. When you say the 'next several months' - this confuses me. For me and I would think for most, having a business failure changes the course of your lives forever, and just as in any mistake or tragedy you make out of it the best you can. Money may be gone, but what lessons are learned that can make for a better tomorrow. It is the same as any other problem- only it is on a much huger scale. I hope you and your family can come together during this time of crisis. It splits up many. Best of luck, take stock of what you have and be grateful you can learn from the lessons the failure will teach you and your husband.