Running a business that is not a limited company means you are classed as self employed. This is true whether you employ a number of staff or are a sole trader on your own. You may be using a trading name or running the business under your own name.

As you and your business are the same legal entity, you are personally responsible for any debts that you incur in its running, even if you take an overdraft or loan under the business’ trading name.Therefore if the business gets into financial trouble you could be personally responsible for the outstanding debt and your home may be at risk. However, all is not lost, by taking the correct actions personal financial disaster can be avoided.

Personal debt solutions can be used to turn the business around

If you believe that your business could trade profitably without the burden of debts you currently have, then a personal debt solution could give the business a new lease of life. There are three main options available:

– Debt Management Plan (DMP)

– Individual Voluntary Arrangement (IVA)

– Bankruptcy (As self employed you can continue to run your business even if you are bankrupt)

The solution that you choose will depend very much on your personal situation, whether you are a home owner and whether you feel your business can continue to trade profitably in the future.

Each of the personal debt solutions will reduce the amount you pay to your creditors each month which will make ongoing trading easier. The options of IVA and bankruptcy will also lead to debt being written off which is of course a major advantage.

Business Banking is the major hurdle

The major problem to overcome when dealing with self employed business debt is your business banking facilities. If your business owes money to its bank and you implement a debt solution, you will almost certainly need to move your account.

Even if your business bank account has no debts but you have a personal account and debt with the same bank, it is likely that you will have to close both your business and personal accounts.

It is not necessarily a big issue opening a new bank account. You should note however that it will be unlikely that you will get a credit card or overdraft facilities. If you want to maintain a particular line of credit such as a credit card, this may be possible using a debt management plan. However this would need careful planning and is not necessarily advisable.

If you are self employed and your business gets into financial trouble, you are personally responsible for the business debt. However, you can often save the business and turn things around using a debt solution such as DMP, IVA or bankruptcy.

The key to saving your business is to take prompt action. If you feel that your business has financial problems, you should take expert advice as soon as possible. Such advice will very often lead to a solution which will allow you to continue trading successfully in the future.

Author Bio: Derek Cooper is Managing Director of Cooper Matthews Limited . If your business is in financial difficulty why not talk to us about solutions, more info at http://www.company-debt.co.uk/help-for-sole-traders.html Cooper Matthews specialise in Business Debt Rescue providing insolvency advice for businesses in difficulty and business owners with personal financial problems.

Category: Business Management
Keywords: self employed,failing business,personal debt,insolvent company,financial difficulty,insolvency