Closing Down a Business

[savvyshopper]

I have posted a couple of times in here before.

However I have now taken the decision that I need to close my business down.

I have not taken on any other debts for the last 3 months and have assets of approx £16,000.

However I have debts of
VAT = £2,000
PAYE = £500
Stock = £12,000
Rent = £10,000 (lease runs out in march)
accountant = £2,000
Directors Loan £200,000 (I know I cant get this back)

A business loan which is for £16,500 which has a personal gaurntee against it.

If I continue the business untill end of December I can pay off the VAT, The Stock and some of the back rent. However there will still be some debts remaining.

My question is. How do I close the business down with debts still remaining and not wanting to re-open it.

Also continuing trading at the moment am I breaking any laws as I am workign in the best intrest of the business creditors at present, not taking a wage.

Your advice would be much apprectiated

 

[mhall]

1st question as ever, are you a Limited company with a couple of personal guarantees or a sole trader?

 

[mhall]

Depending on your answer to the above question ( I am assuming Limited as you mention Directors Loan), you need to decide what your priorities are. Personally mine would be to protect myself and then people I will need in the future and so my list would be:

1. Make sure your accountant is paid, S/He will be invaluable in the closing down process and making sure all the aperwork is done correctly.

2. I would then pay any small suppliers - you may need them in your next venture.

3. Rent would depend on who the landlord was, the chances of them allowing you to trade till Christmas and whether you can legally do this (are you trading whilst insolvent?)

4. VAT and PAYE would be last on my list, not first.

5. Get your stock out as soon as you can, and then tell everyone you have ceased trading. Search for Spongebobs fantastic letters and send them off.

 

[savvyshopper]

I am a Ltd company.. With personal garuntees on the business loan. The lease is also in my name but its a lease agreement where it was sub letted to me from another business, and they stand as garuntor for that rent. So I am not sure where I stand with this.

 

[mhall]

I am a Ltd company.. With personal garuntees on the business loan. The lease is also in my name but its a lease agreement where it was sub letted to me from another business, and they stand as garuntor for that rent. So I am not sure where I stand with this.

Concentrate on paying off anything that is personally guaranteed. You don't have to worry about your lease by the sound of it, I hope they were not your friends

 

[kulture]

Depending on your answer to the above question ( I am assuming Limited as you mention Directors Loan), you need to decide what your priorities are. Personally mine would be to protect myself and then people I will need in the future and so my list would be:

1. Make sure your accountant is paid, S/He will be invaluable in the closing down process and making sure all the aperwork is done correctly.

2. I would then pay any small suppliers - you may need them in your next venture.

3. Rent would depend on who the landlord was, the chances of them allowing you to trade till Christmas and whether you can legally do this (are you trading whilst insolvent?)

4. VAT and PAYE would be last on my list, not first.

5. Get your stock out as soon as you can, and then tell everyone you have ceased trading. Search for Spongebobs fantastic letters and send them off.

You have to bear in mind that the above actions, although sensible, are all in themselves illegal and if you do them you are likely to leave yourself open to personal liability for the debts. You will loose the ltd company protection.

 

[savvyshopper]

Thank you for the advice. I am trying to pay everyone fairly and equally without favouring one creditor over another. I am also working the business free, so I cant see myself being called into question for the final stages of the business and how it was run.

What I am wanting to know is how I close it down ?????????? I am not intending on opening another Ltd company up, I will be looking for paid employment after I have closed this.

I will also be entering into an IVA for the business loan and also some credit cards I have.

All yoru help is much appreciated.

 

[mhall]

You have to bear in mind that the above actions, although sensible, are all in themselves illegal and if you do them you are likely to leave yourself open to personal liability for the debts. You will loose the ltd company protection.

Don't disagree, but It's what I would do in the real world. The chances of anyone realsitically chasing you personally is remote. Whilst treating everone equally sounds good, in truth the personal loan will become immediately payable and therefore, it could be argued, needs paying off first as it will be due first. Clutching at straws perhaps but we all know that VAT and PAYE won't kick up a major fuss over what is mere pennies to them.

I would, however, worry about the rent.

 

[savvyshopper]

Would I be best liquidating the company as it could be insolvent and how much does this usually cost to hire an I.P ???

Thanks

 

[mhall]

Would I be best liquidating the company as it could be insolvent and how much does this usually cost to hire an I.P ???

Thanks

If you are trading while insolvent then you must act

Of course you could appoint an IP, but there appears to be little money in the business as the first job of the IP would be to make sure that they get paid themselves and they certainly won't help you on the personal guarantee front - depending on who you choose they will cost anywhere from £5k - £12k. I think they are expensive but some people will happily pay this just so they don't have to do anything themselves

There are much easier and cheaper ways to deal with this.

Again, I urge you to serach for Spongebobs letters and invite your creditors to push you into liquidation - they won't as they won't want to pour good money after bad, but you will be doing the "legal" thing.

 

[savvyshopper]

OK thank you for this information. You are correct there is no way I could find £5k to pay an I.P.

If someone could give me some guidance as to how to go about doing this yourself legally, this would be great. Also how do I find sponge bobs posts????

Thanks

 

[Alan R Price]

OK thank you for this information. You are correct there is no way I could find £5k to pay an I.P.

If someone could give me some guidance as to how to go about doing this yourself legally, this would be great. Also how do I find sponge bobs posts????

Thanks

I reiterate what was said above - you should not pick and choose whom to pay - and you certainly should not favour your pals or the bank.

You can find any member's posts by using the search facility above.