FAQs | Running a Business While Bankrupt
You can operate a business while bankrupt but there are some rules you will need to follow:
- You cannot have stock while bankrupt as the stock will vest in your bankrupt estate as after-acquired property. You can however hold stock on consignment from a third party.
- You must have your name in the title of the business, for example, Crystal Clear Window Cleaning by Billy Bloggs. If you do not use your name as part of your business name, you are required by law to disclose to all your customers that you are bankrupt.
- If you have a trade credit account or otherwise obtain credit or undertake to supply goods and services, and the amount exceeds $5,934 you will need to inform the credit provider or the person you are dealing with that you are bankrupt.
- You can only operate the business as a Sole Trader.
Other things to note:
- You may find it difficult to obtain Public Liability Insurance, talk to an insurance broker they may be able to help you if your current insurer is unwilling to provide you the cover.
- Bankruptcy may affect your ability to work in some professions or industries. If you are a member of a professional or licensing body check to see if bankruptcy is a limiting/disqualifying factor.
- The ATO will be notified of your bankruptcy. If you have an ABN, the ATO will usually deactivate your ABN, this is standard practice. All you will need to do is contact the ATO and ask them to reactive your ABN, which they will do without issue.
- You cannot be a director or manage a company while bankrupt. Section 206B of the Corporations Act 2001.
Nicholls & Co have a complementary ‘help desk’ to answer your questions on bankruptcy. Call Nicholls & Co on 1300 060 122 or email firstname.lastname@example.org.