Operating a business as a sole trader can be tough. While you may think that running your very own café, restaurant or service booth is the best option for running a business smoothly, sole traders face a lot more consequences than they think about.
While it’s true that you get to be your own boss, keep profits to yourself and don’t have to deal with managerial hierarchy, most sole traders tend to overlook the risks associated with the business.
If you’re thinking, “Entrepreneurs are supposed to take risks,” think again. In case, you end up in debt, your personal assets will be the focus of your creditors. This means your car, your personal belongings, such as your furniture, jewellery and even your house!
On the bright, sunny side, debt consolidation companies are the best option for dealing with hungry and angry creditors. Even if you end up filing for bankruptcy, you can sit back and relax while your credit consultants handle everything!
Unfortunately, debt consolidation has a bad annotation attached to it when it comes to sole traders. There are many misconceptions about it, even though it’s the best option for sole traders in debt. Here are some of the ones to avoid:
You Can Close Your Business and Move Away
This is a bad, bad idea. This should be out of your mind before it even enters it! This is because as a sole trader, your personal assets are on the line. Secondly, you still have to pay your creditors. This should be done as soon as possible before they decide to file a lawsuit against you. Debt consolidation companies provide consumer proposal as well. In Canada, consumer proposal differs from province to province and territory to territory. However, one thing is common: the counsellors negotiate your debt for you. They can reduce it by a notch and you don’t have to pay interest!
My Insurance Will Be Sufficient
There is a limit to what insurance can provide you with. It can cover the legal costs of damages done to clients through your business but it can’t cover debt. Furthermore, debt and legal obligations are two different things. If you owe clients money for damage done to their business, you will be legally required to pay for the damages. That is to say, you are obligated to pay the full amount. With debt, you can negotiate through consumer proposals.
I Can Just Earn More an Repay
While it’s true that savings and earning more can reduce your debt, it’s a bad idea to blindly follow this. This is because if your business is failing and your daily operations aren’t running smoothly, it can result in your business shutting down. Therefore, the smarter choice is to opt for credit counselling, where you can design a budget plan with a professional.