closing sole trader business

V

voilet

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I have a manufacturing business i owe €45000 euro in overdraft and €50000 put in myself. I am always owed money and i have about €25000 bad debts.I would close down only im not sure where leaseing and suppliers will stand do i have to pay them back.Or can i walk away .I own a nice house that i got out of working seven days a week doing up old houses and selling them can this be taking off me.The money im owed and stock would just about clear the suppliers but no money to pay for redundancy to six employees.
 
As a sole trader you are personally responsible for your debts. You need to speak with your solicitor and accountant on this as a matter of urgency.
 
How did you let things get this out of hand? What has guaranteed your bank overdraft of 45k? I find it hard to believe that a bank in today's climate would let this overdraft arise. I wouldn't like to be one of your unfortunate employees if you don't intend paying redundancy.
 
STEINER said:
How did you let things get this out of hand? What has guaranteed your bank overdraft of 45k? I find it hard to believe that a bank in today's climate would let this overdraft arise. I wouldn't like to be one of your unfortunate employees if you don't intend paying redundancy.
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In business situations like this happen, even with the best efforts of the proprietors.

The O/D may be given subject to some security. In that case the bank would pursue them personally for it. I assume this did not arise yesterday and was probably granted before the recent clampdown on funding.

I don't think the OP ever said they did not intend paying redundancy. They said they would not have the funds to do so. In that case the redundancy fund of the DETE would come into play and the employees may make claims directly.
 
I will sell my house to pay my employees redundacy if i have to .As for letting things get out of hand i am always owed around 200,00 euro.I have written off about 30000 euro bad debts in the last year.I had an overdraft of 100000 euro now its only 45000 for the last 18 months .I have a turn over of 1.5 million per year.The overdraft is guaranteed by 3 acres of land.
 
The bank may force an issue when they have security on the land. However discussion is what is needed. Also, before DETE will pay employee redundancy lcaims they usually look for a statement of affairs of the employer and if DETE pay out they can pursue the employer for the employers portion. Remember where the employer has the funds to pay they can claim back 60% of the statutory redundancy from DETE so redundancy costs 40% of the amount paid. It's a sad situation you find yourself in, I would suggest as already mantioned that you talk with your professional advisors as soon as possible to try and deal with the banks, creditors etc.
 
Thanks for that graham.Havn't told my wife yet and need to have everything sorted before hand.Just wondering has anyone been in same position before.Accountant told me to meet suppliers and see if they will settle for less and close down business when as many debts are collected and start fresh on a smaller scale.I have a good business only for getting wrong clients who d'not pay and we have a top class product that is easy to sell.
my head is going ninty even in my sleep trying to slove this .
 
voilet said:
Thanks for that graham.Havn't told my wife yet and need to have everything sorted before hand.Just wondering has anyone been in same position before.Accountant told me to meet suppliers and see if they will settle for less and close down business when as many debts are collected and start fresh on a smaller scale.I have a good business only for getting wrong clients who d'not pay and we have a top class product that is easy to sell.
my head is going ninty even in my sleep trying to slove this .
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I got some legal advice yesterday.First of all steiner was right he couldn't believe how far it had gone with out my accountant spotting the problem.Any way he told me to offer my suppliers stock back and half of what i owe and then get on to the bank and get them to give me a stocking loan over five years for the €45,000 i owe in an overdraft.Then close for two weeks and start with new business name ,same staff and premises.He told me this would work and that he had helped someone do it two weeks ago.He also said to get rid of my accountant.(easily know he is un employed for the last six months)Just wondering had any one heard of someone or done this themselves.
 
I hope you are successful in saving your business. I would think your creditors would be willing to take back stock and negotiate on the money owed. What is their alternative!!!

When you set up again, I would look at ways of minimising bad debt!! Not giving out credit too easy, I know at the same time you want business, but if your not going to get paid, then its not business. I have this debate with my hubbie all the time. In these uncertain times, credit to customers seems to be a thing of the past.

Best of luck.
cheers caz
 
yes good luck voilet,some people can be harsh with their replies,hope they never find themselves in such a position,all this stuff has a tendancy to creep up on you but it looks like you will pull out of it eventually,your in a lot better position than a lot of them,keep going,there is seeds sprouting out there,lots of luck
 
Violet, I do not understand the legal advice. If you close the business you are personally liable for all debts as you are a sole trader so how do you actually gain by closing and reopening?

do you own the business premises or are you leasing them? If you are leasing then you will have to enter into a new lease! You will have to buy more stock but now run the risk of having trouble obtaining stock as you have just done the whole phoenix syndrome thing! This similiarily applies to getting a bank account and leasing companies.

This also means it will be imposible for you to ever get your €50,000 back!

Why did you go to a lawyer? Before you do anything get yourself that new accountant and see if there is anything that can be done to save the existing business. I would be afraid that the new business has no chance of success if the old business failed. So you need to work out what went wrong and plan to fix it going forward!
 
how i gain from closing is all my suppliers will be cleared.The business premises are rented but i have kept up rent payments.I know about the stock but my business from now on will be based on people paying me deposits that will cover the cost of buying in the material.How the business failed was due to the bad debts from commerial customers.All my leasing will be cleared from the sale of the machines.Its sounds easy but its not.Trying to figure out the right way of doing this is the trouble.And about the accountant no other accountant will touch my company unless my current account will give the books but im not willing to pay him so he is holding on to them.
Have to tell the staff before christmas what a **** thing to be doing.
 
I still dont understand how closing the business clears your debts with suppliers as you are a sole trader!

With regard to the commercial customers, why are they bad debts is there anything you can do ie legal letters or sell the debt for a discount?

You cannot be guaranteed that the sale of the machines will clear the leasing liability. I have often seen it where directors of companies value machines at x but when it comes to finding a buying the directors estimates have been way off. Have you got a valuation from an auctioneer or better still a buyer lined up! also how are you planning on running the company if you have sold the machinery? are you planning to buy it yourself? It is one thing for a company director to buy company assets but you are a sole trader!

I dont see why an accountant will not touch you just because you dont have previous books and records. Especially those who specialise in recovery and reorganisation!
 
@ Voilet, I feel for you in your situation, but as Jack2009 says, you are a sole trader and you are personally liable for any debts incurred by the business. You cannot walk away from these debts by closing down the business for two weeks and then starting a new business. The debts will follow you until you manage to clear them.
 
RonanC said:
@ Voilet, I feel for you in your situation, but as Jack2009 says, you are a sole trader and you are personally liable for any debts incurred by the business. You cannot walk away from these debts by closing down the business for two weeks and then starting a new business. The debts will follow you until you manage to clear them.
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Thanks Ronan, I too feel for Violet and very worried that a bad situation is about to get worse from what appears to be wrong legal advice.
 
I am going on what the solisitor has told me.As for the machines all of them have only one year if not less to pay off on them,so even the guy that i bought them from said he will give me the money for them.If only i could last another year i would have four thousand extra in cash flow every month because i would have the machines paid back.
Never heard of these accountants that specialise in recovery.
I have tried everything to collect my money from my commerical customers.I went so far i followed one of them in to a restraunt where he was with all his big shot business friends and had it out with me he basically told me to 8888888 because he folded up the company.
The supplier debt will only go if the suppliers agree to take back the stock an take a discount on the amount i owe.
I will start up with basic machines and start back up like i was ten years ago.
These commerical debts will never be recovered and all of them meet me in cars worth €80,000 to€100,000 and tell me that the companies that owe me the money are gone and that their very sorry but they can't pay the debts.
WHAT DO YOU DO WITH PRICKS LIKE THAT.
 
I feel two sentiments here. One of sorrow for the state that you are in (cant sleep, etc) and two exasperation with the way you are thinking. On the one hand you are calling the people who dont pay you 'XXXXXX' and on the other hand you are not paying your own debts whilst admitting to enjoying your fine house. You also blame your accountant. This may or may not be warranted but it seems everyone else is to blame except yourself. Maybe if you drew less out of the business and had a more modest house you may have been able to pay your suppliers. All businesses suffer bad debts its up to each individual business to minimise their exposure. Also were you adequately managing your business when you were buying up these old houses? I am fed up with people whinging when their business sink because the captain was asleep on the deck!
 
If the Company Directors have money, even if the company has folded, it can be revived, and they can be made to pay. It takes time, true. You need a solicitor who knows this stuff. (Suggestion sent by private message, no connection)
They walked away from companies, sheltering behind the limited liability, but you as a sole trader, can't do the same. Get legal advice, get revenge, get the money owed to you.
And if at all possible, hang in there. Restructure what outgoings you have, ask your employees if they can cut their working week etc. Collect what you can of what is owed to you, involve your wife. Persistence will pay off.
 
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