Corporate Bankruptcies Canada: Bankruptcy is a common way for a small business that is trapped in debt to formally shut down the business. It is a way for a business owner to shut down the business and have a trustee handle the file so that all affected will know everything was done in a transparent manner. For larger businesses it is more common for lenders to force a bankruptcy.
Filing business bankruptcy in Canada can be quite complex, because the types of creditors you have and how your business is structured will have an impact on your bankruptcy.
A small business bankruptcy can be quite costly as well and you need the services of a professional business bankruptcy trustee who has experience with working with insolvent small businesses.
As there are alternatives to bankruptcy that could be available for a small business, your trustee will help you explore any such available alternatives that could save your insolvent business from going bankrupt.
The Type of Small Business Will Impact
Your Small Business Bankruptcy
Partnerships / Sole Proprietorship Business
If your small business is structured as a partnership or as a sole proprietorship then you will have to file personal bankruptcy as the business and the person that operates the business are not legally separate; your personal and business assets and liabilities are not legally separated in a sole proprietorship or a partnership.
If you have an incorporated company the business is legally a separate entity with the assets and liabilities being held by the business and separately from the business owner.
If your business is incorporated then you do not have to file bankruptcy personally and your business can go bankrupt.
Certain assets that your incorporated business holds will be sold by your bankruptcy trustee to distribute the funds to your creditors.
In a small business bankruptcy there might be certain creditor classes that have preference over the business’ assets and these creditors will be paid first and receive preference when funds raised by the sale of your business assets are distributed by the trustee.
Are you Personally Liable for Small Business debts?
Business debts that you have personally guaranteed can be included in your business bankruptcy, although if you do this your creditors will simply come after you personally for any debt that you personally guaranteed; this means you might have to file personal bankruptcy as well.
If possible you can negotiate with your creditors to maintain new payment terms if you have personally guaranteed business debts because you must proceed very carefully.
As with any serious consideration, you need to seek the professional advice of a Licensed Insolvency Trustee, who is federally regulated and licensed by the OSB (Office of the Superintendent of Bankruptcy).
Does Your Small Business Make Money?
If your small business is profitable over the long term but is facing temporarily money problems and difficulties paying debts, your bankruptcy trustee can help you explore other ways other than bankruptcy to help restructure your liabilities. A business proposal is an effective way to save a business.
If your small business has been losing money for a longer period of time, you might want to consider closing the business.
To learn more about business bankruptcy please contact a government licensed business bankruptcy at 1-877-879-4770 or by email.
If you have any questions about this or other aspects of bankruptcy or consumer proposals you can set up a FREE consultation with our trustees, who are in every province and territory in Canada:
If you still have questions you can ask our licensed insolvency trustee your questions in confidence. Our bankruptcy blog also covers many topics on bankruptcy in Canada.
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