Sole trader insolvency and liquidation advice

Setting up as a sole trader is the most common way to start a business in the UK. But with sole trader status also comes personal liability for your business’ debts. When you first started as a sole trader insolvency was probably the last thing on your mind. If you’re now facing financial difficulties, it’s vital that you seek professional help as soon as possible.

There are a variety of ways – both informal and formal – that we can solve sole trader insolvency. We’ve given you an overview of them below. If you need advice from a licensed professional immediately, our insolvency practitioners are ready to help you.

Call us on 0800 054 6590 or request a call back

company voluntary arrangement

The options for sole trader insolvency – and how we can help.

A question we’re asked a lot is “Can a sole trader go into liquidation?” While this is a viable option for limited companies looking to shed their debts, it’s not possible for a sole trader. However, you still have options that will allow you to manage your current debts and recover from sole trader insolvency.

sole trader insolvency

Informal negotiations

Not all financial challenges result in sole trader insolvency. Maybe you’re struggling now but can make changes to recover your profitability in the long term. In this case, we recommend approaching your creditors to arrange the repayment of debts in a way that’s manageable for you.

We can work with you to create a proposal that’s beneficial for you and your creditors. Creditors will be in a better position if you make smaller, regular repayments than if you become insolvent and can’t pay back any of the money owed.

If your debts are to HMRC, we can create a similar proposal to negotiate repayment of unpaid taxes. This is called a Time to Pay Arrangement and is an official service offered by HMRC.

Individual Voluntary Arrangement (IVA)

An IVA is a formal, legal way of creating a debt repayment plan and a good option if you’re currently in an insolvent position. An IVA will freeze your current debts and allow you to repay some or all of them over a period of years. 

You’ll need to appoint a licensed insolvency practitioner to oversee an IVA. Our role is to negotiate the payments and terms with your creditors and then make sure these payments are made on time and in full. You’re free to continue business as usual with an IVA. This makes it an effective way of shedding some of your debts and gives you much-needed breathing space to focus on making your business a success. 

sole trader IVA
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This is really the last resort for sole trader insolvency and one we can help you avoid in many cases. We don’t recommend it as the first solution. Once you declare bankruptcy, due to the personal liabilities that come with being a sole trader, you’re likely to lose personal assets as well those linked to your business. The severity of this will depend on the amount of debt your business has and the value of your business assets. 

If you do have to use this option, we’re here for you every step of the journey with advice and guidance. 

Sole trader insolvency doesn’t have to mean the end of your business. We make sure we have a clear understanding of your unique situation and take into account your ideas of where to go next with your business. If there’s a way to turn your business around, we’ll help you find it. 

Call us on 0800 054 6590 or request a call back

Other ways we can help

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