Robert Kiyosaki’s Company files for Bankruptcy

It’s surprising to learn that a  company linked to Robert Kiyosaki, the author of the highly successful book Rich Dad, Poor Dad, has filed for bankruptcy. Kiyosaki’s company, the Rich Global LLC, resorted to bankruptcy protection after a US$24 Million award was made in favor of Learning Annex (and its founder and chairman, Bill Zanke), which assists Kiyosaki in organizing speaking engagements.

[See also Options for Entrepreneurs in Financial Distress: Suspension, Rehabilitation and Insolvency]

The word “bankruptcy,” used in the same line as a speaker and an author who tells people how to retire early and get rich, sounds like a death sentence in business and finance. In the Philippines, perhaps, but bankruptcy is a normal recourse in the U.S.

Bankruptcy, in common parlance, is basically a declaration that a company has no enough money and assets to cover its liabilities. It could be initiated by the debtor-company itself or its creditors so that the remaining properties could be liquidated and distributed in accordance with the prescribed order of preference. This procedure allows an individual to shed the burden of existing debt and start on a clean slate. In other words, a bankruptcy proceeding protects, to a certain degree, the bankrupt debtor.

A corporation’s filing of bankruptcy does not automatically mean that it’s individual members and officers are also bankrupt. We previously discussed the separate personalities, and liabilities, between the corporation and its incorporators. In the case of Kiyosaki, it appears that the bankruptcy affects only one of his companies. It doesn’t mean that he’ll sleep on the sidewalk, without money. He has his other properties.

[See also Liquidation of Insolvent Individual Debtors and Insolvency and Criminal Cases]

Bankruptcy is always an option to an entrepreneur who took a risk in a particular undertaking and lost. It’s a way for an en entrepreneur to get a fresh start. To illustrate, among the list of US entrepreneurs who sought bankruptcy protection are Henry Ford, Walt Disney, Milton S. Hershey (founder Hershey’s Chocolate), H.J. Heinz (founder of Heinz Ketchup), and Donald Trump.

In sum, a robust entrepreneurial culture, in aggressively pursuing opportunities, recognizes risk and the attendant probability of business and financial failure. Bankruptcy and similar proceedings recognize the risks taken by entrepreneurs and provides a mechanism for them to start anew. It is, after all, a graver entrepreneurial sin not to try, as compared to trying, failing and trying again.

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