Insolvency or carry on

[Goulders30]

Hi all. I’m yet another business owner in need of some advice before I have a heart attack through stress!
I started my company in 2016 and it’s grown quite well. The pandemic didn’t affect it and in many ways helped grow the business.
2 1/2 years ago I employed my wife to look after the bookkeeping and deal with all the financial side whilst I was out doing the physical work. Long story short, she has wrecked the finances. I thought I had a decent amount in the business account (£80k+) but 14 months ago I found out that I had £2k. I was due £15k from a job so thought it would be ok. Then my year end accounts came in along with a £14k VAT bill that my wife hadn’t been putting to one side. I managed to weather the storm and carry on but paused by BBL (I took this out to help expand the business by buying a house to do up but in the end used it to buy a van as the engine seized on my old one) and paid the VAT over an extended period. Through the accounts being mismanaged, I’ve had to pause the BBL again. I’ve just found out that I have a credit card with £12k on it.
This is the current state of play -

BBL of £14k
Credit card with £12k
BCP on company car £20k (can be handed back in 12 months)
Van paid for outright but worth £10k
Company tools - not sure what they are worth.
Anticipated VAT bill shortly £6k
Business accounts - £12k

I have no employed staff any longer and my wife has gone from company! She is employed elsewhere and does have a well paid job thankfully.

I want to work but because my wife has mismanaged the accounts (also my fault for not checking although she has lied to me about the state of the accounts and I just believed her!) I don’t know what to do for the best.

As far as I can see my options are-

-Close business as insolvent and let the debts die with the business
-Carry on like I am and pay off the debt over the next couple of years.

However , if I close the business, could I start another business as a sole trader and somehow use/buy my van and tools?

I have no problem paying the debts etc. I do worry that the stress it puts me under will actually kill me as I’m an anxious person at the best of times. I don’t like having any debt and due to the mismanagement by my wife, I am terrified of what else is going to come up just as each time I get myself in a better position, another debt shows itself (the £12k credit card was todays extra debt that I didn’t know I had as my wife only 2 weeks ago said the credit card was clear!)

Any help or direction would be gratefully welcomed.

Thanks for helping me out. ?

 

[ChrisCallaghan]

Hi @Goulders30 ,

Firstly I'm sorry to hear about the stress and anxiety this is causing you.

Before considering closing the company, it would be worth considering what's happened to all the funds? Is there now an overdrawn directors loan account?

 

[JEREMY HAWKE]

If you carry on with the company how long will it take to pay the debts off

There are quite a few videos on this site to help with the running of the business and once again this reminds of the @Ozzy video where he explains that the money in the account is not yours

 

[Goulders30]

Hi @Goulders30 ,

Firstly I'm sorry to hear about the stress and anxiety this is causing you.

Before considering closing the company, it would be worth considering what's happened to all the funds? Is there now an overdrawn directors loan account?

As far as I’m aware there is nothing owed to the directors accounts. The year before last, it turns out my wife was just withdrawing money and in the end all that got paid out as dividends. But because she took out most of the money, when corporation tax was to be paid, there was nothing left. Then she missed sending some big invoices to the accountant which left us with a £14k VAT bill and only about £5k in the VAT account. So I had to pay that back over the next quarter.

 

[Goulders30]

If you carry on with the company how long will it take to pay the debts off

There are quite a few videos on this site to help with the running of the business and once again this reminds of the @Ozzy video where he explains that the money in the account is not yours

I’m only 49 so will be working for a long time yet so in theory I can pay it back over the next few years to make it manageable. To be honest, I hate having debt and had instructed my wife to pay things off each month and she simply hasn’t and there is no excuse. I went from having £80k in bank when she started to almost nothing in the bank when she left the role and the amount of graft I’ve had to do to put it right so far really stresses me as in all honesty, I don’t know if I’m able to do it for another 3 years till the debt is paid.

 

[ChrisCallaghan]

As far as I’m aware there is nothing owed to the directors accounts. The year before last, it turns out my wife was just withdrawing money and in the end all that got paid out as dividends. But because she took out most of the money, when corporation tax was to be paid, there was nothing left. Then she missed sending some big invoices to the accountant which left us with a £14k VAT bill and only about £5k in the VAT account. So I had to pay that back over the next quarter.

I would certainly double check with your accountant if the funds withdrawn can be classed as legal dividend. If the company was not profitable enough to allow the level of dividend taken, you may have inadvertently created an overdrawn loan account.

Popping that aside for a moment, I would briefly say that either option is viable. The debt levels don't appear to be so high that you cannot recover, and if you can come to arrangements with your creditors over the next two years, then this could be your preferred way forward.

Alternatively you could consider liquidating, discharging the unsecured debts and starting again, either as a sole trader or through a new Ltd. A liquidator can arrange for the sale of the company's assets to you or your new company.

I would suggest that it would be sensible to explore the liquidation option with a licensed insolvency practice. Taking advice will give you a better and fuller understanding of this option to help you understand all your options before you decide what is right for you.

Myself (and the other insolvency regulars here on UKBF) offer free consultations at no cost for this purpose. Please DM me or contact me using the details in my post signature if you'd like to arrange a consultation, however I would ask that you speak to your accountant about the dividend/directors loan position first.

 

[JEREMY HAWKE]

I’m only 49 so will be working for a long time yet so in theory I can pay it back over the next few years to make it manageable. To be honest, I hate having debt and had instructed my wife to pay things off each month and she simply hasn’t and there is no excuse. I went from having £80k in bank when she started to almost nothing in the bank when she left the role and the amount of graft I’ve had to do to put it right so far really stresses me as in all honesty, I don’t know if I’m able to do it for another 3 years till the debt is paid.

I know I'm stating the obvious but it gets mentioned on here quite often and hopefully others reading this will take the advice that is given by the usual suspects on this forum and that is

Only give jobs to people that know what they are doing and not because they are family

 

[Newchodge]

I’m only 49 so will be working for a long time yet so in theory I can pay it back over the next few years to make it manageable. To be honest, I hate having debt and had instructed my wife to pay things off each month and she simply hasn’t and there is no excuse. I went from having £80k in bank when she started to almost nothing in the bank when she left the role and the amount of graft I’ve had to do to put it right so far really stresses me as in all honesty, I don’t know if I’m able to do it for another 3 years till the debt is paid.

I take it you now have safeguards in place to ensure that neither your business nor your household has a recurring problem with this. People can get into the habit of spending unreasonably.

 

[JEREMY HAWKE]

I take it you now have safeguards in place to ensure that neither your business nor your household has a recurring problem with this. People can get into the habit of spending unreasonably.

He will after he has spent the afternoon watching Ozzy ?

 

[Goulders30]

I take it you now have safeguards in place to ensure that neither your business nor your household has a recurring problem with this. People can get into the habit of spending unreasonably.

Sadly I’ve had to learn the hard way. I trusted my wife and she has really badly let me down. Thankfully she has returned to her old job and does bring in good money to keep the household going but she’s left my business in tatters and I now need to put it right and ensure it doesn’t happen again.

 

[Goulders30]

I know I'm stating the obvious but it gets mentioned on here quite often and hopefully others reading this will take the advice that is given by the usual suspects on this forum and that is

Only give jobs to people that know what they are doing and not because they are family

Completely agree!

 

[DWS]

Sadly I’ve had to learn the hard way. I trusted my wife and she has really badly let me down. Thankfully she has returned to her old job and does bring in good money to keep the household going but she’s left my business in tatters and I now need to put it right and ensure it doesn’t happen again.

You seem to be putting a lot of blame on the wife, If she has such a well paid job now have you asked her to contribute to the mess she has left?

 

[Frank Wessely]

Hi @Goulders30

It is not possible to say with any certainty which route you should take based on the existing information. You should prepare a prudent cashflow for 2024 to assess whether the business can realistically afford to pay back its debts but also generate the required level of income for you. Or even better, have your accountant do this to ensure its credibility.

If it can and you are prepared to put in the work then there are grounds to continue. If not then you should consult an IP to obtain advice on your options. It is too early to state what your options are because I am sure that there are other moving parts to this situation.

It is your company and your decision irrespective of whatever your wife did or did not do. You have the executive responsibility just as you did over the past 2.5 years.

Thanks.

 

[Elliot Green]

£80,000 in the bank at a given point in time is not necessarily £80,000 of net assets / net wealth when there are liabilities that need to be taken into account. So it might not be a case of book-keeping mismanagement.

 

[japancool]

Perhaps it's time to trade in the wife for a more up-to-date model.

 

[Gavin Bates]

I agree with Frank have a deatailed look at what this year will look like. Most IPs will be happy to sit with you for an hour to chat it over and explain the alternatives which should allow you to make an informed decisio.

 

[Mark James]

First thing you need to do starting tomorrow is build your heart fitness.. do a 30min run tomorrow regardless of your fitness level- uh no excuses Mr Gould get on it tomorrow, do it Monday to Friday and have the weekends off.

You’ve got aniexty and sounds to me it’s partly health aniexty which is common so don’t worry too much just take action and strengthen your cardiovascular system which you can do easily with commitment.

Take your blood pressure in 6 weeks and see the difference, you will then have mental confidence that your pump is strong and working well which guaranteed will make you feel better and able to deal with the next phase. O and by the way exercise daily including stretching will solve so many of your problems mentally and physically. Cannot emphasis this enough. No excuses. Do it.

Start wearing nice clothes and put on aftershave everyday and value yourself and have pride be outward thinking and positive. The vibes you give out will return to you 10 fold. Your aniexties will start melting away.

Once you’ve rebuilt yourself sit down with possibly one of the insolvent pros on here and go through your options and start making a plan and a route to whichever way you decide to go.

Just knowing you now have a plan will make you feel better.

1. Work on yourself
2.Once ready (and you’ll know) talk to one of the insolvency professionals.
3. Get plan in place and execute
4. Don’t do 2 and 3 until you’ve done number 1, 6 weeks isn’t long and nothing bad will happen in that time.

And lastly don’t let the missus near your business ever again.

 

[Goulders30]

You seem to be putting a lot of blame on the wife, If she has such a well paid job now have you asked her to contribute to the mess she has left?

She has in essence become the main breadwinner and that will pay the mortgage and bills etc. In theory I only have to add in a small amount to the household pot which will mean I can start repaying the debt.

 

[Goulders30]

£80,000 in the bank at a given point in time is not necessarily £80,000 of net assets / net wealth when there are liabilities that need to be taken into account. So it might not be a case of book-keeping mismanagement.

I did have £80k and it had already been subject to corporation tax and there was nothing to pay other than a dividend tax if I withdrew it. I was also looking to invest it but more importantly I had financial security and didn’t have to borrow money to pay for materials for jobs etc.

 

[Goulders30]

Hi @Goulders30

It is not possible to say with any certainty which route you should take based on the existing information. You should prepare a prudent cashflow for 2024 to assess whether the business can realistically afford to pay back its debts but also generate the required level of income for you. Or even better, have your accountant do this to ensure its credibility.

If it can and you are prepared to put in the work then there are grounds to continue. If not then you should consult an IP to obtain advice on your options. It is too early to state what your options are because I am sure that there are other moving parts to this situation.

It is your company and your decision irrespective of whatever your wife did or did not do. You have the executive responsibility just as you did over the past 2.5 years.

Thanks.

I completely agree that I was responsible for the decisions and didn’t keep a close eye on things. In my defence, I was out grafting and in my head was working out the numbers earned and spent and was quite happy with that. My accountant didn’t say anything either but was happy to double my fees!
What I didn’t know was that credit bills weren’t being paid off in full and money was being withdrawn without my knowledge. It’s still my fault though.

 

[Newchodge]

I did have £80k and it had already been subject to corporation tax and there was nothing to pay other than a dividend tax if I withdrew it. I was also looking to invest it but more importantly I had financial security and didn’t have to borrow money to pay for materials for jobs etc.

So what did she spend it on?

 

[Goulders30]

So what did she spend it on?

She wasted a lot on the kids and insignificant things. Admittedly with hindsight we lived beyond our means but I knew what was being brought into the company and it was a lot so didn’t think too much of it. (I know that is my fault too). I also tried to grow the company and let her sort the advertising out but it transpired that thousands was spent on various unnecessary advertising that brought nothing to the company and wasn’t cost effective. Then on top of that she allowed herself to be scammed out of about £8k although I got back about £6k. It all added up to a lot going out of the account.

 

[JEREMY HAWKE]

Well I would get the kids out working looks like they are in on it too ?

 

[JEREMY HAWKE]

First thing you need to do starting tomorrow is build your heart fitness.. do a 30min run tomorrow regardless of your fitness level- uh no excuses Mr Gould get on it tomorrow, do it Monday to Friday and have the weekends off.

This is madness
While I am one of the ones on here that trains everyday with a solid back ground in distance running and other sports (two years at East Devon College studying sport) I would not encourage someone that is not from this environment to just go out and run at 49 and in a heap of stress

Just go for a walk but he never came on here for fitness training advice or relationship advice (God knows he needs it )

He just wants our business experience

 

[Lisa Thomas]

Hi all. I’m yet another business owner in need of some advice before I have a heart attack through stress!
I started my company in 2016 and it’s grown quite well. The pandemic didn’t affect it and in many ways helped grow the business.
2 1/2 years ago I employed my wife to look after the bookkeeping and deal with all the financial side whilst I was out doing the physical work. Long story short, she has wrecked the finances. I thought I had a decent amount in the business account (£80k+) but 14 months ago I found out that I had £2k. I was due £15k from a job so thought it would be ok. Then my year end accounts came in along with a £14k VAT bill that my wife hadn’t been putting to one side. I managed to weather the storm and carry on but paused by BBL (I took this out to help expand the business by buying a house to do up but in the end used it to buy a van as the engine seized on my old one) and paid the VAT over an extended period. Through the accounts being mismanaged, I’ve had to pause the BBL again. I’ve just found out that I have a credit card with £12k on it.
This is the current state of play -

BBL of £14k
Credit card with £12k
BCP on company car £20k (can be handed back in 12 months)
Van paid for outright but worth £10k
Company tools - not sure what they are worth.
Anticipated VAT bill shortly £6k
Business accounts - £12k

I have no employed staff any longer and my wife has gone from company! She is employed elsewhere and does have a well paid job thankfully.

I want to work but because my wife has mismanaged the accounts (also my fault for not checking although she has lied to me about the state of the accounts and I just believed her!) I don’t know what to do for the best.

As far as I can see my options are-

-Close business as insolvent and let the debts die with the business
-Carry on like I am and pay off the debt over the next couple of years.

However , if I close the business, could I start another business as a sole trader and somehow use/buy my van and tools?

I have no problem paying the debts etc. I do worry that the stress it puts me under will actually kill me as I’m an anxious person at the best of times. I don’t like having any debt and due to the mismanagement by my wife, I am terrified of what else is going to come up just as each time I get myself in a better position, another debt shows itself (the £12k credit card was todays extra debt that I didn’t know I had as my wife only 2 weeks ago said the credit card was clear!)

Any help or direction would be gratefully welcomed.

Thanks for helping me out. ?

I haven't read to replies due to time constraints so apologies if I am repeating something here.

First of all you need to take insolvency advice from a license Insolvency Practitioner. Closing down via liquidation is not necessarily the only option. Continuing to trade under the protection of a CVA might be viable, or even Administration.

It might also be possible to 'do a phoenix' by starting the business again via liquidation.

You do need to take care in trading on whilst insolvent as you are opening yourself up to the risk of claims being brought against you personally, if the company ultimately ends up in an insolvency procedure.

More info can be found on my video here: https://youtu.be/01lTdazWwTk?si=ogH_9wd-L0pU3iGK

 

[Mark James]

This is madness
While I am one of the ones on here that trains everyday with a solid back ground in distance running and other sports (two years at East Devon College studying sport) I would not encourage someone that is not from this environment to just go out and run at 49 and in a heap of stress

Just go for a walk but he never came on here for fitness training advice or relationship advice (God knows he needs it )

He just wants our business experience

It’s fine Jez he has good baseline fitness levels as he is a builder doing 10hr days onsite. The lad needs to concentrate on himself for a bit to get his head right, get clarity feel confident in his heart health to stop the health anxiety and come out fighting.

 

[Goulders30]

Hi all. Apologies for the time not replying. I’ve been trying to work out what to do.
Since my last post, things have changed a bit. The current state of play is as follows. I still owe the £12k on the business credit card, a bounce back loan of £14k (I can pause this for 12 months), corporation tax of £12k due in October and the directors loan is owed £24k (£8k tax on top or if I can pay the £24k back by October, the tax goes). I can probably pay back a good chunk of the £24k by then but not all of it, and I can request the corporation tax is paid back over the next 12 months. Again, this is affordable just about.
My wife has gone back to her old job and will bring in £3k a month and I only have to contribute about £1k a month to cover our living expenses.
This is down to me because I didn’t supervise her spending and should have so I have to deal with it and she can be the main earner for a while whilst I sort it out.
So, do I concentrate on paying back the £24k then once that’s paid, no one can touch my house etc and I can then put the business into insolvency and start a new business (without any input from the wife) or actually just get a job without the stress of running a business or do I struggle through for 3 or 4 years just to pay back the Barclaycard and the BBL?

On a slightly separate note, what should I have expected from a certified accountant? I thought they would work on my behalf to make me tax efficient and look after my business interests. I hear many stories of accountants getting involved and telling business owners to save money, stop spending money, spend some money or notify them that something is going wrong or right with the business accounts. Mine has just been an expensive calculator and in their words, have just dealt with ‘compliance’ and that has cost me £4k plus vat a year. Was I expecting too much from them?
Sorry for all the info. It’s been a stressful time.

 

[Lisa Thomas]

When you say you can put the business into insolvency, do you mean you intend to liquidate it?

If so I would recommend you don't carry on with your plan to trading as you may well make matters worse.

Take advice and consider liquidating sooner rather than later to mitigate the risks of personal claims against you.

You can then agree a plan with your liquidator to repay the DLA. Some will allow you to repay this in instalments depending on your circumstances.

I cannot comment on your accountants services as it depends on what the company hired them to do.

 

[Goulders30]

When you say you can put the business into insolvency, do you mean you intend to liquidate it?

If so I would recommend you don't carry on with your plan to trading as you may well make matters worse.

Take advice and consider liquidating sooner rather than later to mitigate the risks of personal claims against you.

You can then agree a plan with your liquidator to repay the DLA. Some will allow you to repay this in instalments depending on your circumstances.

I cannot comment on your accountants services as it depends on what the company hired them to do.

Hi. No I don’t intend on going into liquidation if I can help it. The business income is still very good and is continuing to pay back any debts etc.

 

[Lisa Thomas]

Can you clarify what you mean by this please: "I can then put the business into insolvency"

 

[Goulders30]

Can you clarify what you mean by this please: "I can then put the business into insolvency"

I don’t know what I am allowed to do or not. There is no plan to put the business in liquidation. I don’t want to do that and have no intention to do that. I’ve just worded it badly.
The business is doing well enough and brings in money to cover the debt, pay a salary and running costs and will do for a long while.
In any case, I made an appointment to speak with an expert next week to discuss my options and after a brief conversation with them earlier, it doesn’t seem as bad as I thought.

 

[Mark T Jones]

I don’t know what I am allowed to do or not. There is no plan to put the business in liquidation. I don’t want to do that and have no intention to do that. I’ve just worded it badly.
The business is doing well enough and brings in money to cover the debt, pay a salary and running costs and will do for a long while.
In any case, I made an appointment to speak with an expert next week to discuss my options and after a brief conversation with them earlier, it doesn’t seem as bad as

 

[Lisa Thomas]

FYI Mark I don't think your comment has loaded.