Businesses, like individuals, can suffer from too much debt and this is often exacerbated by the lack of access to finance.
A number of factors, such as high borrowing, high overheads, onerous credit terms, reduced demand for a product, the insolvency of a supplier/customer or a regulatory change can lead to significant cash flow challenges for businesses. Once creditors are chasing for payment the business owner(s) has two options: try to save the business while attempting to settle outstanding accounts or allow the business to fail by implementing an exit strategy that minimises the financial consequences.
The structure of your business will define your legal responsibilities, such as:
- the paperwork you must fill in to get started
- the taxes you will have to manage and pay
- how you can personally take the profit your business makes
- your personal responsibilities if your business makes a loss
As a business owner or director you are likely to fit into one of the main organisation types which are Sole Trader, Partnership or Limited Company.
Whatever your situation, seeking professional advice such as that provided by SKSi is strongly advised.