Image by Natalia Ovcharenko from Pixabay

By James Daniels

Bankruptcy is something that we all strive to avoid, but it can happen, even to the best of us. If it does happen to you when you’re running a business, then there are several things you need to consider when announcing this, and how you should proceed.

One of the biggest concerns at this juncture is likely to be what is going to happen to the staff. But there are other concerns too as you will need to make payments, ensure that other debts have been paid, and make sure everything ends smoothly. Read on to find our more.

Initial steps

In the very first instance of bankruptcy or insolvency, the company will cease to do any business. It will also have to cease paying or employing anyone within the company, which is where the issues for your employees will start, especially if you haven’t got good insurance like the one offered by American Tri-Star Insurance Inc.

At this point, it’s also worth pointing out that there are some steps you can take to rescue the business so that it doesn’t have to close down entirely. However, this will depend on the circumstances that have caused the business to reach this point in the first place. Bankruptcy lawyers have the specialized knowledge to guide you through the choices you will need to make so it’s important to reach out to an appropriate firm as soon as possible.

What type of business are you

Another factor that will determine any of the options you have is what the business type is. For instance, if you’re a sole trader or a partnership, you will become bankrupt. This is important to know as these types of businesses do not make the distinction between owner or business, so if one is bankrupt, so is the other.

Running an incorporated business means that you’re running a limited company. This means that the company is a separate entity from the owner and means that it has got its own account and assets. If this business fails, then you, as the owner, will not have your finances affected.

How insolvency or bankruptcy occurs

There are different ways a company can reach this point. For insolvency, this is when a company is unable to pay debts, the value of any assets are less than the money the company owes, or when there are more payments needed which have been court-ordered and left unpaid.

If you find that even just one of these things has occurred, then it’s likely that your company is in serious financial trouble. It is time to seek some help in this area. If you’re not sure that you’re insolvent though, you can also get in touch with companies providing advice.

Shifting priorities

Once you’re bankrupt, you have to turn your focus away from running your business. Instead, you must turn your attention to all your creditors maximizing their interests. These means you must limit any creditor liabilities you may have, i.e. stop trading and get some help. If you don’t do this, you may end up in more trouble.

If you don’t take steps to ensure creditors are looked after, you may end up being liable for any of the debts the company owes. In the worst case, you can also be banned from starting a new company and operating as the director for a long time. However, if you do things properly, you might not even go out of business.

_______

James Daniels is a freelance writer, business enthusiast, a bit of a tech buff, and an overall geek. He is also an avid reader, who can while away hours reading and knowing about the latest gadgets and tech, whilst offering views and opinions on these topics.