Monday, August 8, 2016

Bankruptcy in Australia - Will I lose my business if I go bankrupt?


When people in Australia come to me looking to talk about Bankruptcy, they are usually full of questions. The internet has plenty of information, but far too much of it is baffling or contradicts itself, so I make it my mission to try and make it clearer. One of the most typical troubles is 'Will I lose my business if I declare bankruptcy?' The short answer is no. If you are an owner of a business any shape or size you can maintain your business if you wish to. In Australia, businesses that eventually are insolvent have a few options such as liquidation, voluntary administration and so on. It's people who go bankrupt not businesses.

Bankruptcy is a complex area so get some expert advice on this if you have a business. Generally speaking, the financial obligations in a business and personal debts go hand in hand when a business owner declares bankruptcy. There are some important implications for directors of companies when it pertains to Bankruptcy in Australia: A bankrupt can not be a director of a company, so if you have a pty ltd company you will likely need to resign as a director soon after you're bankrupt.

A constraint that applies when you are bankrupt as a business owner is that you can be in your own business as a sole trader only. Certainly there are things you must reveal as a part of that but in a nutshell you can still run your business. For some business owners, bankruptcy affects their ability to run the business because of the licensing issues. For example, if you run a building company, your license will be suspended once you're bankrupt and consequently you can not trade without that license, so make sure you are asking the appropriate questions when it concerns licenses and Bankruptcy in Australia.

But if your business is not impacted directly by such issues, then you'll have to restructure the way you run your business. There are considerations when and if you go bankrupt as a business owner: you can not rack up heaps of debt in your company, then go bankrupt then open the doors the next day like absolutely nothing had happened. There are laws in place to prevent what is called phoenix companies appearing out of the ashes of an old business.
Having said that, it's just an issue of talking with the correct people about Bankruptcy. In this situation you may think you need a liquidator for your company, and you might be right, but bear in mind that every liquidator is different and have their own motives. Liquidators profit from your liquidation - heaps of money - so what advice do you believe you will get?

When it comes to Bankruptcy, I consider that giving generic advice in this area is essentially damaging as it can have very serious implications for directors and business owners. This is because it is one of those cases where what the right guidance for one business owner is the wrong advice for the other. There are some principles however, that you may benefit from. There is no reduce to the size of the business you run when you are bankrupt. You can employ staff. You can continue to deal with your distributors under certain conditions, the main one being you will need to meet the payment terms agreed upon.


So when it comes to Bankruptcy, don't get extremely confused about what you can and can't do as a business owner, just get the best advice ... If you want to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to call Bankruptcy Australia on 1300 795 575, or visit our website:bankruptcy-australia.net.au

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