Sole Proprietorship

What is a Sole Proprietorship?

A sole proprietorship is a business that is operated by one individual and has not been incorporated;  essentially, the individual and the business are one legal entity.  When a bankruptcy or proposal is filed, all debts are listed, and both personal and business debts are discharged at the same time. A sole proprietor will normally have a municipal business license, may have employees, and be registered for provincial and federal sales taxes. These will all be dealt with during the bankruptcy and proposal proceedings. The reporting of the business’ assets and liabilities will reflect that they are personal in nature.

Partnerships

What is a Partnership?

A Partnership is an unincorporated business with more than one owner.  The business is treated as a separate entity and is usually governed by a Partnership Agreement. Partners are personally liable for Partnership debts.

If a Partner files a Proposal or Bankruptcy, his or her ownership in the Partnership is disclosed as a personal asset.  The Partnership may separately file an Assignment in Bankruptcy or a Proposal but only if the partners also file an Assignment in Bankruptcy or a Proposal.  In bankruptcy proceedings Partnership liabilities are first paid from the proceeds received from the disposal of the Partnership.

CORPORATE BANKRUPTCY

A Corporate Bankruptcy involves a corporation only.  Corporations are separate legal entities distinguished from the individuals involved, such as: officers, directors, and shareholders.  A bankruptcy situation presents itself when the corporation can no longer carry on its business at a profit, and/or is being pressed upon by creditors and as a result is in need of an orderly winding up, sale of its assets and distribution of the proceeds to the creditors.

A meeting with a licensed Bankruptcy Trustee may often determine whether a bankruptcy, formal proposal, or a simple closure is the answer.

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PROPOSALS

It may be possible to file a Proposal to creditors, which may in turn allow a financially troubled company to remain in business by providing protection from creditors and setting an altered payment plan to its creditors. A Trustee in Bankruptcy can assist and counsel business owners to determine whether a viable Proposal can be made.

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