Business Bankruptcy

There are two types of business bankruptcies:

• Sole proprietorship or a partnership
• Incorporated businesses

In a sole proprietorship your personal and business assets are grouped together in bankruptcy.

Where the business goes bankrupt the bankruptcy affects the owner personally and all personal assets are grouped together with the business.

Incorporated business the business is considered a separate entity. The bankruptcy does not affect the personal assets of the owners of the company.

A corporation is considered to be a legal entity in Canada, so in business bankruptcy only the corporation is affected.

Businesses are responsible for the debts of the company.

As there are two different types of business structures in Ontario, there are two slightly different bankruptcy processes.

★★★★★ We did everything possible to keep the business going but it was no use.  My friend suggested YanchDey to get some advice.  I called and they were very helpful and informative, they even told me I could buy some of the assets back from the company that I wanted.  The process was straight forward and the trustee took care of everything for me.  If your considering a business bankruptcy give them a call.  Paul Vorvis, Ajax

Business owners of sole proprietorships or partnerships are responsible for:

• the debts of the business
• the personal assets of themselves
• the debts of their partners.

The assets of the business and the owner’s personal assets are grouped together. This becomes a personal bankruptcy where all of your business and personal assets are affected.

In this type of business structure the owners should review and consider the alternatives to bankruptcy such as a consumer proposal before making a decision to bankrupt the company as any bankruptcy will affect the owners personally.

Incorporated businesses are legal entities. An incorporated company can own things and receive credit or loans, but they are their own being.

The owners are shareholders of the incorporated company, but they do not own the property or incur the debts of the company.  The directors may have some personal liability for the incorporated company for such things as taxes, credits held personally and payroll deductions.  More about director liability

An incorporated business gives a business owner a liability protection. In this case, a bankruptcy would only affect the business not the owner(s), only the assets of “the business” can be taken, not anything you personally own.

This means, when an incorporated company goes bankrupt only the incorporated company is responsible for any losses – not the owners or directors of the company.

The shareholders credit is usually not affected when the company goes bankrupt, only the company.

When a business files for bankruptcy:

• the company is forced into or voluntarily seeks bankruptcy protection
• all of the company’s property assets are turned over to the Licensed Insolvency Trustee,
• the trustee sells the property of the bankrupt company and distributes the money to any creditors.

A shareholder or owner of the company can buy back the assets of the company by personally buying the assets for the fair market value assessed by the bankruptcy trustee.

Where the company goes bankrupt, the Insolvency Trustee will review the payroll records and officially notify your employees.

As employees of a bankrupt corporation, Service Canada has a program that ensures all employees are reimbursed for all or part of their wages. They will also address severance, termination pay and any outstanding holiday pay.

The staff and Licensed Insolvency Trustee of Yanch Dey & Associates Ltd. are interested in helping you and can guide you through this process.

We offer a free consultation for you to come and discuss your business.

Many times just talking about your issues will help you to proceed and get the help you need. Call now to discuss your finances.