work tools and bankruptcy

April 6th, 2009 by Questions

In Ontario would a sole proprietorship that was publishing children books and have about 1600 printed books filing for bankruptcy be allowed to keep them as tools of the trade or would they have to go to auction as they are finished products in inventory?
Would this inventory have to be listed on bankruptcy forms as assets of value, at cost or retail value?

Also could the business drop one word from their old business name, register a new name very similar and use the same logo, domain name, etc and be allowed to still sell the books when the graphic artist & editor were never paid for their services? Could the graphic artist & editor make a claim against the new company for profiting on their services never paid for?

Posted from: Ontario


One Response to “work tools and bankruptcy”

, A licensed trustee said:

The finsihed books represent inventory, not tools and their value will have to be paid to your trustee (if you file for bankruptcy). There “value” is whatever the can be sold for. If your trustee sells them to a liquidator they will go for pennies on the dollar. If they can be sold at retail in a relatively short period of time then your trustee may decide to do that instead. It literally depends on the marketability of the books.

If you’ve been operating as a sole proprietorship then you won’t have to change the name – your business is not a separate legal entity. When (if) you file for bankrutpcy you take the business and its debts with you. That will include the graphic artist and the editor.

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