When a business can no longer pay its debts, the business owner’s may start to consider bankruptcy. Before you make any decisions, be sure to talk to a trusted advisor to see if there are any alternative solutions to your problem. Filing for bankruptcy should always be your last resort. Read on to learn a bit more about corporate bankruptcy, and how Liu & Associates can help.
Small Businesses
If your business is a sole proprietorship or a partnership, a corporate bankruptcy will essentially be a personal bankruptcy. This is because the assets of the business can not be held separately from your personal assets.
Sole Proprietorship
If you have a sole proprietorship and you file for bankruptcy, the business will be seen as a separate venture from the day the bankruptcy goes into effect. If you’d like to start another business, you’ll have to get a new business number and set up new accounts with the CRA.
Partnership
If you are part of a partnership with only two people and you file for bankruptcy, the original partnership will cease to exist. If there are more than two people in the partnership, business continues but some sort of deal must be reached to handle the bankruptcy.
Incorporated Businesses
If an incorporated business files for bankruptcy, it is considered to be an independent legal entity. Therefore, a business owner’s personal assets will be kept separate in most circumstances. When a corporation files for bankruptcy, it can no longer exist. The only way a corporation can keep running is if it pays all its debts when in the process of declaring bankruptcy.
How To Declare Corporate Bankruptcy
If you’ve talked to a licensed trustee, considered your options, and still feel that declaring bankruptcy is the best option, here are a few of the steps you’ll need to take:
- Talk to your licensed trustee and fill out the proper paperwork. Your trustee will file these forms on your behalf.
- Once the paperwork has gone through, your trustee will begin to sell any property, investments or assets.
- All institutions with which you carry a debt will be notified about the bankruptcy by your trustee.
- You may need to meet with creditors to determine how they could receive payment for the debt owed to them.
- The Office of the Superintendent of Bankruptcy Canada (OSB) may bring you in for questioning regarding your excessive business debt.
- There will be some sessions with a debt counsellor to hopefully prevent future debt problems.
- Your trustee will create a summary of the actions your took during the bankruptcy and submit this to the OSB.
- There may be a hearing to make your bankruptcy official.
- Lastly, your debt that qualifies under your bankruptcy will be wiped away and legally discharged.
Liu & Associates Can Help
Business bankruptcies are complicated. If you are contemplating bankruptcy, or are looking for a licensed trustee, contact Liu & Associates. Our team is ready to help you get back on your feet.