Monday, October 22, 2018

Toronto Business Bankruptcy Alternatives for Your Small Business

Many small businesses are facing financial difficulties in these hard times, and many
entrepreneurs only see bankruptcy as the only option they have to pursue relief from
excessive levels of debt. But that shouldn’t be the case as there are many
Toronto business bankruptcy alternatives that are available for small business owners.


Filing for business bankruptcy in Canada can be very complex. There can be personal
implications that may affect your family, business partners and other people who are
in one or the other connected to the company. Much of the bankruptcy process has a
lot to do with the structure of your business and the types of creditors you have.


Partnerships and Sole Proprietorships


If your small business is legally set up as a partnership or as a sole proprietorship it
means that the business is structured in such a way that your personal assets and
liabilities are not legally separated from the business. As such, you as the business
owner is the one who goes bankrupt and not the business itself. This is treated as a
personal bankruptcy and your creditors are dealt with according to the laws under a
personal bankruptcy. As a consequence, any personal assets you have will be used
to limit the liabilities towards any creditors.


Incorporated Businesses


In an incorporated company, the business is considered a separate entity from the
person that operates the business. This means that your personal assets and liabilities
are legally detached from the business and, in turn, assets and liabilities of the business
are held separately from those of the business owner. The company can go bankrupt,
and the assets of the incorporated business will be sold to reduce the liabilities to your
creditors. Personal assets of the business owner will not be touched.


You will need to be very careful if you are thinking about bankrupting the business.
Another thing to weigh on is the possible implication if you have personally guaranteed
business debts. Creditors will no doubt go after you for the debts you have guaranteed
and this might force you to either negotiate repayment terms with creditors or to file for
personal bankruptcy as well.


If you assess that your small business will still be able to make money for the long term
and is merely facing hard times due to the economic downturn, you might want to consider
making a an informal or formal proposal with your creditors or finding another alternative
such as placing your business into receivership or sell the business without the help of a
secured creditor.

A small business bankruptcy can actually be very costly and, consequently, it can create
more problems than it solves. It’s not a solution for all and may not be the best option for
your small business. It’s crucial that  you as business owner understand all the other
Toronto business bankruptcy alternatives that are available to save the business before
deciding on bankruptcy. Consult with a licensed insolvency trustee or a lawyer to get
professional advice and more specific information about you can save your business from
insurmountable debt.