Negative Equiry

[Chilli]

Can a small business still operate (legally) if it has negative equity? Cashflow may be ok.

Cheers.

Edited by Chilli on Wednesday 2nd October 11:10

[Chilli]

Obviously, I meant equity!

[ringram]

do you mean liabilities exceeding assets?

yes you can. it depends on forbearance by the creditors.

If you think you can trade your way out then cool. If not then you should kill it before it gets worse. Though with ltd liability many dont bother, they wait until someone pulls the plug on them.

At that point its worth thinking about reputation damage etc..

[Chilli]

Thanks for that, yes, Assets-(Equity+Liabs)=Negative! Would auditors still compile a report and the world keeps turning then?

[anonymous-user]

Yes, if you couldn't then very few businesses would ever get off the ground.

The issue is whether you can service those debts and whether there is a genuine chance of improving the situation.

[Chilli]

Perfect, thanks v much.