Finance law includes antitrust, bankruptcy, and securities laws which protect the financial interests of small businesses and individual investors. In this section, you will find an overview on these important laws and how to comply. If your business is facing bankruptcy, you will also find information on this process.
- Antitrust Laws – Refer to this guide from the Federal Trade Commission for information on how antitrust laws work. Antitrust laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices.
- Bankruptcy – In addition to offering tips and resources that can help you avoid bankruptcy, check out this guide for an explanation of bankruptcy options, the process and the tax consequences.
- Securities Law – If your business sells publicly traded securities, then you will need to comply with certain financial and reporting obligations. These include creating clear Securities and Exchange Commission (SEC) disclosure documents and complying with Sarbanes-Oxley. This guide from the SEC provides a gateway to information for smaller companies.
Business owners who can’t afford to pay back their creditors often look to filing bankruptcy as a way to settle their debt and avoid costly legal action. When you file for bankruptcy, your creditors may be prevented from collecting on debts until the process is completed.
How much creditors can collect depends on how your business is structured. If your business is a sole proprietorship, your personal assets may be used to pay off business debts, depending on which form of bankruptcy is chosen. Corporations, limited liability companies, and some forms of partnerships protect personal assets from being used to pay off business debts. Not all bankruptcies are voluntary. Creditors can also petition for a business to declare bankruptcy.
Chapter 7 and Chapter 13 apply primarily to individuals, but affect small business owners who operate as sole proprietorships. Under Chapter 7, the bankruptcy trustee will sell assets to satisfy outstanding debts and discharge debts that can’t be satisfied with the available assets, Under Chapter 13, the trustee sets up a three to five year repayment plan for the debtor to repay debts from current income. The debtor is allowed to keep more assets under this plan.
Chapter 11 applies to both individuals and small businesses. Small businesses who choose this option operate under increased scrutiny but may keep operating under a reorganization plan. Chapter 12 applies to family farmers and fishermen.
The following resources provide some basic information about bankruptcy law:
- Bankruptcy Basics
The U.S. Courts provides businesses that may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed and to answer some of the most commonly asked questions about the bankruptcy process.
- Chapter 11 – The Small Business Case and the Small Business Debtor
Explains rules pertaining to the small business debtor.
- Bankruptcy Forms
Official and procedural forms used in the bankruptcy process.
- Bankruptcy Information Sheet
U.S. Trustee Program fact sheet covering the bankruptcy process.
- Corporate Bankruptcy: What Every Investor Should Know
Discusses what happens when a public company files for bankruptcy, who protects the interests of investors, and what happens to the value of old securities.
- Handling Involuntary Bankruptcies: Part I
Part I of an article that discusses considerations for various parties in interest to an involuntary bankruptcy.
- Handling Involuntary Bankruptcies : Part II
Part II of an article that discusses considerations for various parties in interest to an involuntary bankruptcy.
- Securities and Financial Reporting Laws
Details the requirements for the sale of securities and financial reporting for publicly traded companies.
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