Can you start a business after going bankrupt?
We have previously written about how you can continue to trade a business once you are bankrupt here. But can you START a business after you go bankrupt? This can be an important issue for people who have had a business fail which has resulted in their bankruptcy.
The first thing to consider is that you CANNOT be a director of a company while you are bankrupt. This is generally for a period of three years. So you cannot trade a business through a company.
However, you can start a business as a sole trader, even after you go bankrupt. There are however, some restrictions on what you must do if you start a business.
Restrictions on starting a business after bankruptcy
There are some restrictions on you starting a business once you are bankrupt. These include:
- Your business name must include your own name. So for example you could call your business Joe Smith Transport.
- In Queensland, there is virtually no prospect that you will be able to operate a business which requires a QBCC building licence. Although there can be lesser restrictions in other states.
- You are not allowed to obtain credit of more than certain amount (which increases each year) without telling people you are bankrupt.
- You must retain proper records and be able to provide evidence of your income to your bankruptcy Trustee each year.
So there are some matters you will have to consider before you decide to start a business. As the above restrictions can have some impact on your ability to trade certain types of businesses.
What happens to money you make
The profits you make from your business are deemed to be your income for the purposes of your bankruptcy and may be subject to minor adjustments for bankruptcy purposes. If your income exceeds a certain level for any year of your bankruptcy, you will have to pay income contributions to your bankruptcy Trustee. The amounts you can earn before having to pay funds to your bankruptcy trustee are available here and we have an Income Contribution Calculator on our website to assist.
How we can help
The bankruptcy law has been developed so as to give people who have financial problems a second chance. And from our experience of dealing with bankrupts who already trade, or begin trading a small business, they are able to get back on their feet and succeed.
To find out more and how we can help you right now, either give us a call or put a query in the live chat window (bottom right) on our website and we can help you consider the best options available.