Bankruptcy and your business

Bankruptcy can have serious and lasting implications on your business. The nature of these implications will depend on your business status i.e. whether you’re a sole trader, a partner in a partnership or the director of a limited company.

To learn more about business status, read our factsheets.

It’s also important to remember that businesses don’t go personally bankrupt, individuals do. If a company finds itself insolvent, it may go through liquidation or other insolvency proceedings, such as striking off.

Sole traders

In some cases, sole traders may continue trading through bankruptcy.

Going bankrupt as a sole trader will mean you are no longer liable for any of your business or personal debts. As a result of this however, your business’s assets could be at risk. You may be allowed to retain your tools of the trade, provided they are not of excessive value. 

Partnerships

If a partner in a partnership is made bankrupt, their partnership and personal assets may be at risk. This means that the partner’s share of the businesses assets may be sold to pay the creditors.

Your partnership may also be dissolved, which means it will be unable to continue to trade in its current form.

Limited companies

You won’t be allowed to continue as the director of a limited company if you’re made bankrupt. This means you’ll be forbidden from taking part in any business management or promotion of a limited company. That is unless you’ve got special permission from the court.  If you are a shareholder in a limited company, your shares in the limited company may be valued and sold.

Bankruptcy can have lasting implications for both you and your business.  As a result, it should always be considered as a last resort. If your business is experiencing financial difficulty, get in touch with PayPlan today.