business question

jamesy08

Hi Alll,I set up a business about 6yrs ago,my brother in law went guarantoor for the loan,we set up a limited company,at the moment,the way things are going,we are thinking of getting rid of the ltd company,and i would start trading as a Sole Trader,reason,my brother in law is afraid,if things with the company get worse,he would take a massive hit,as his home etc is par of the guarantee on the original loan,I only owe one supplier less than 10K,another supplier less than 5K,and im paying these guys a little bit every week,as i have to keep money in the account to keep things ticking over,any ideas would be much appreciated
thanks jamesy

DubTony

You want to dump the limited company, but the reason isn't clear. IF it's to protect your brother-in-law, as it seems from reading the post, it won't. The reason the bank wanted a personal guarantee is to protect their interest (money) if the business goes wallop. Are you still paying the bank loan? They will do nothing if you're paying the agreed amount every month. You can't wind up your company without paying off your creditors, unless they've agreed to work it put with them later i.e you personally take on the company's debt. The only way out would be to liquidate. Then you don't need to worry about the creditors or the taxman, as they'll get their cut from whatever's available.
The bank however is a different story. They will come after you and your bro-in-law. Talk to your accountant or a solictor.

trudub

Good advice Tony, i would agree. The only way out, with exception of the bank, is to liquidate or sell. Your accountant will give you an extimation on liquidation costs also.

jamesy08

Hi Tony,thanks for the reply,I was hoping to keep the business running as a sole tader,take on the bank loan myself,and keep paying off the suppliers,im running the company myself for the last 5 yrs,my bil has his own occupation

patftrears

jamesy08 wrote: »

Hi Tony,thanks for the reply,I was hoping to keep the business running as a sole tader,take on the bank loan myself,and keep paying off the suppliers,im running the company myself for the last 5 yrs,my bil has his own occupation

What is the loan your brother is guarantee for ?

Moving from company to sole trader will have zero impact on any personal guarantee.
It will be very difficult if not impossible for the bank to release your brother from the personal guarantee, why should they ?

lecheile

patftrears wrote: »

It will be very difficult if not impossible for the bank to release your brother from the personal guarantee, why should they ?

The bank will consider releasing your BIL from the guarantee if you yourself can offer them a similar level of guarantee, or find someone else to replace him.

That said, its much harder now than it was even 6 months ago to get the banks to accept personal guarantees to the same extend without solid asset backing.