how will personal bankruptcy affect my business

jimmyjimjimmer

Hi. i am about to be made bankrupt in the next few weeks because of an old personal debt, i am going to fight it til the end but i have to be prepared that its going to go against me (as the application to have it set aside did).
What im really worried about is i have a small business i set up with my brother about a year ago, although we are partners and he has put in just as much money as i have he is in the navy so is more of a silent partner, He was only officially made a partner in the company a few months ago so almost everything in the business is in my name, apart from the bank account wich we named his as a partner in several months ago,
Can they make me close the company? can they take the company stock and equipment(we make bespoke pictureframes)
we almost at the end of our first year trading and ive yet to take a salary from the company and although its not yet making profit it was never expected to in its first year(although it wouldve been nice) but the business is slowly picking up all the time.
i would hate to lose it after all the hard work i have put into it this year getting it this far. and of course hate for my brother to lose out on his investment and the faith he put in me and my ability enough to lay several thousand pounds out to get us running.

any advice would be greatly appreciated

sdooley

Do you have a company or a partnership?

If you are truly partners with your brother that is bad news as your creditor can go directly after the assets of the business and if the business also has debts those creditors (not your personal creditors) could also go after your brother personally.

If you have set up a limited company, the position is a little better. The only asset you have is the shareholding in the company, which the trustee in bankruptcy could take, but which is likely to have little value - so the trustee might well be amenable to your brother buying out the entire shareholding for some nominal amount - you could then work for the company and draw a salary while your brother would get any profits. The trustee can't normally go against the assets of the company - because they belong to the company not you.

jimmyjimjimmer

so would i be better to register the company as an LTD? wouldnt that seem a bit obvious a couple of weeks before the bankruptcy hearing? but i would be prepared to it if it meant saving the company, if i didnt think it had a future i would'nt be so determined to save it.
my Brother has always been aware that any company debts incured we are both liable for. the company doesnt really have any assets to speak of, there is no company car or anything and the equipment i use to make frames is not alot of moneys worth, probably about a grand and i only hold about a hundred pounds worth of stock at any one time and the bankruptcy petition is for about 6

jimmyjimjimmer

sorry meant to say, initially i was going to go it alone so it was originally set up as a sole trader, but i needed investment at the very start so my brother came on board financially, it wasnt until about 6 months in before it was registered officially as a partnership with the tax office and the bank

sdooley

It's too late to set up as a limited company a couple of weeks before the bankruptcy.

Your best bet is to fight the creditor - is there no way you could make an offer to the court to pay them off in instalments?

Your brother may be aware in abstract but you should let him know in reality what has happened.

JCS1

A partnership is dissolved when one or more partners is made BR. The OR will then write to the solvent partner and ask them to account for any assets.

Have you spoken to business debt line for advice?

How much is the debt that they're threatening BR for? You post mentions six hundred pounds? They can't make you BR on a creditors petition if under £750.

jimmyjimjimmer

do you mean account for the company assets? it doesnt really have any. the debt is a personal debt for just over 6 thousand, i wouldnt even mind the partnership being disolved and my partner becoming my boss. we have been through alot to get it this far and it is slowly but gradually doing better all the time and im confident it definately has a future if it can just stay open.

kew63

Definately speak to Business Debtline, they will be able to help & offer advice