Sole Traders
Sole traders have different liabilities to companies and the procedures require to deal with insolvencies are also different.
Sole trader’s debts can have a serious impact on personal circumstances. If you are a sole trader and feel your business is becoming insolvent, the Business Rescue Service can help you with all aspects of the process, including bankruptcy or IVA.
What is a sole trader?
Sole Traders are individuals who choose to trade under their own name or have a specific trading name. As a result, they do not trade via limited liability and are therefore personally responsible for all business debts that they may incur.
IVA
An alternative to bankruptcy, an Individual Voluntary Arrangement acts as a legally binding agreement between the individual and their creditors. It is required that this process is overseen by a licensed insolvency Practitioner and is generally viewed as having less stigma than bankruptcies.
The advantages of an IVA include:
- Being able to continue trading during the process.
- Less stigma than bankruptcy.
- Fewer restrictions than if a sole trader was made bankrupt.
- Affordable repayment rates.
- IVA’s are not reported in local papers
Repayments are done over a schedule, agreed to during a meeting with creditors of which at least 75% must vote in favour of the arrangement. If you fail to keep up with your IVA payments, you will become liable to be declared bankrupt. The use of third party insolvency services is recommended to ensure the process is undertaken efficiently, and with the business’ best interests in mind.
Bankruptcy
If you are trading as a sole trader or are within a partnership and become insolvent you can be made bankrupt. In addition to this if you have given a personal guarantee to settle the debts of your limited company, you become personally liable for them and can be rendered bankrupt.
If you are made bankrupt your estate will be taken control of by an insolvency practitioner or official receiver, who acting as a trustee will sell or convert your assets to settle creditor debt.
How we can help?
We have experience in helping insolvent sole traders and partners to overcome their financial issues and work towards feasible company restructuring. This is achieved by way of an informal arrangement with creditors, or by using a formal process such as an IVA. An informal arrangement is better suited when there are a small number of creditors, but for most trading situations, an IVA is the best possible option.
For more information on how we can help you with administration orders, sole trader insolvency and other areas of business debt, please call us on 0845 468 2395 or visit our contact page.
