Closing a Business Doesn’t Mean the Debt Disappears
Closing a business does not automatically eliminate its outstanding financial obligations. Depending on the circumstances, leases, CRA obligations, and personal guarantees may still need to be addressed after operations end.
Knowing which obligations may impact the business owner personally will provide the business owner with a better idea of the financial impact of closing. Taking the time to review these responsibilities before deciding can also help avoid unexpected costs or complications later.
Questions to Consider Before Making a Move
Before selling assets, ending operations, or notifying creditors, business owners should have a clear understanding of their financial position. Some important questions to consider include:
- Will a corporate restructuring to reduce or eliminate the debt make the business viable?
- What debts and CRA obligations will the business owner become personally responsible for?
- Are there leases, contracts, or other ongoing commitments that are personally guaranteed?
- Have any business debts been personally guaranteed?
- What assets does the business currently hold?
- Will selling the assets pay all the business debts?
Reviewing these questions before acting can help owners identify potential concerns and make more informed decisions about what comes next.
Closing May Not Be the Only Option
When a business is struggling with debt, closing may feel like the only option. However, depending on the business’s financial situation, there may be other paths to consider, including a debt restructuring proposal to creditors.
Exploring these options before winding down operations can help business owners understand whether it can continue or whether a closure or debt restructuring proposal is the appropriate path forward.
How a Licensed Insolvency Trustee Can Help
If your business is struggling with debt, speaking with a Licensed Insolvency Trustee early can help you understand the options available before making any significant decisions.
They can review your business’s financial position, explain the impact of closing the business and the options related to a debt restructuring proposal, and help you understand what may be involved if closure is necessary. Getting guidance early can also help you avoid decisions that could create additional financial complications.
Moving Forward
Closing a business with debt requires careful consideration. Understanding what your business owes, which obligations may remain, and what options are available can help you make a more informed decision about what comes next.
If you’re considering closing or restructuring your business, get the clarity you need before you act.
