Small business failure.
October 20, 2009 3:36 PM Subscribe
What happens to the owners when a small business fails?
Let's say that Mr. X started a small brick & mortar business. He had a reasonable business plan. He had a bit of savings, but also got an SBA loan as well as a bank loan to finance the rest.
Let's say that Mr. X sets up shop. He works hard preparing, he hires employees, he buys materials, he engages a marketer and advertises and markets the business, opens the doors and... customers just don't come. Let's say he gradually lets the staff go. Still few customers. He tries to find another business that will buy the business he set up. No takers. His hand is forced, and he liquidates the assets and closes the doors. Since he doesn't have a job, he can't repay the remainder of the SBA or bank loans.
What happens next to Mr. X? Does Mr. X lose his home, his car? Does he have to declare personal bankrupcy? Can his business be bankrupt without the risk of him losing his personal possessions?
How can someone wishing to start a small business insulate themselves against the risk of failure? Actual anecdotes about starting a small business and failing would be appreciated.
(Note: I don't own a business -- this is all purely hypothetical.)