How To - Learn About Business Failure

Business failure is an event that occurs when your business has reached a point where it is insolvent (insolvency means you are unable to pay your bills when they fall due) and where it can no longer continue to trade without putting yourself into a situation of further financial hardship and problems.

These problems will often worsen if you continue to trade and you find yourself getting deeper and deeper into debt.

The business will fail when it stops operating for either of the following reasons:

  • It becomes insolvent - that is, it is unable to pay its debts when they fall due and so the decision is made to close the business down, rather than continue to trade unprofitably and worsen the financial situation.

  • It becomes bankrupt - (this only applies to non-company operations), or it goes into liquidation (applies only to companies), which is the same thing. It involves the process of someone taking over the business to distribute the property or cash of the business to pay off creditors.

Failure within 5 years a Sad State of Affairs
The fact that so many businesses fail within t...

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