Bankruptcy threat - Question about the future

Lisaloppylulabell

Hi

Please forgive me for not knowing a thing about this. My husband is a sole trader and has been struggling to pay his bills. HMRC have phoned this morning saying he owes 6000 which he has to pay by 11th Dec plus the next VAT bill which will be due then too. He has no idea where this 6000 has come from so he is scrambling to the accountant as we speak.

I think personally we are headed towards bankruptcy as there is no way we can pay, he has a couple of other outstanding payments and HMRC have basically given the options of bankruptcy or court action.

My question is - If my husband is declared bankrupt can I then open a similar business but as a Ltd company so I’m the Director, I’m in charge of the paperwork and he works for me or is that not allowed?

I can’t find anything on Google that would answer this. I am asking because things were just starting to pick up and he was moving to a new premises in the New Year and I would hate to see him lose his dream because he’s been lumped with a huge bill we simply cannot afford (fingers crossed it’s an accounting mistake which he thinks/hopes it is).

So in black and white terms - can he be declared bankrupt and then I open another business or is that illegal?

MEM62

There is nothing that prevents you from buying or starting a LTD company. Neither would there be any restriction on your husband working for you because he is bankrupt. (Unless, of course, the company operates in certain regulated industries, such as finance.)

However, there are some things to consider;

Firstly, you will have an additional administrational burden in running a LTD company, including operating payroll. Secondly, you - as the business owner/director become responsible for it.

My last thought is that, if the business is not viable now (If it were your husband would be able to meet his tax obligations) what makes you feel that it will be viable in the future? There needs to be a fundamental change in the fortunes of the business. How would you achieve this?

Lisaloppylulabell

The admin stuff wouldn’t be a problem, I currently don’t work due to illness but some paperwork at home would be very doable. He is in the automotive trade

Basically my hubby was really crap at getting his paperwork done and wasn’t sending invoices out as fast as he should’ve been and bills started piling up (it was a part of the paperwork I couldn’t help with, that’s why I didn’t do it). He has arranged to move to cheaper premises in the New Year and has put his prices up to a similar level of his competitors too. He got his act together and everything got caught up and we were just starting to see a light at the end of the tunnel and then this has happened.

Also kind of related. If he were to declare business bankruptcy do the receivers look into your personal accounts too or just business ones? I only ask because the hubby has a joint account with his mum as his dad is paralysed. It technically isn’t his account but has his name on it. I wouldn’t want his mum to suffer if he was made bankrupt. Thanks

MEM62

If he is a sole trader then he does not have a separate business entity to put into liquidation. If will be him personally that is made bankrupt.

The account that he holds with his mother will have to be explained to the receiver. Others with more expert knowledge will comment I am sure but I think that there is also a risk that this could be frozen or closed by the bank.

Lisaloppylulabell

Thanks for replying again.

Do you think he could talk to his mum and get his name taken off that account or will that just look dodgy if he does end up bankrupt?

MEM62

I would suggest that he separate all financial ties with his mum. You might also want to look at your own financial association with your husband. Any joint financial products, including bank accounts which may be frozen, will be of interest to the receiver as will any joint assets. If you own you own home and have equity in it that is also at risk.

You really need to take proper (formal) advice.