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Scott Terrio is a certified credit counsellor and manager of consumer insolvency at Hoyes, Michalos & Associates Inc.

Small-business owners who find themselves in financial distress often resort to not remitting HST or payroll tax in order to maintain cash flow until times improve. However, the prolonged impact of the COVID-19 shutdown has made it difficult for these improved times to materialize, resulting in uncontrollable debts for many business owners.

With the addition of substantial HST and payroll tax debts to their bank credit, coupled with the approaching repayment deadline for federal pandemic business loans, countless business owners now find themselves at their wits’ end.

The recent announcement by the federal government to extend the end-of-year repayment deadline for the Canada Emergency Business Account (CEBA) loans is undoubtedly a welcomed move. However, it remains uncertain whether the government fully grasps the gravity of the situation.

For incorporated businesses, the debts incurred are corporate, not personal. In theory, business owners could simply close their corporation and walk away from the debt, as it would cease to exist with the corporation. However, in practice, it is not that simple. The personal and corporate aspects are often intricately intertwined for many small businesses.

Unfortunately, sole proprietors cannot merely walk away from their CEBA debts, as their business debts are indivisible from their personal debts. There is no legal separation between the two. Even for incorporated businesses, owners often shoulder a significant amount of personal debt.

Furthermore, there are business debts for which the owner bears personal liability, such as unremitted HST and employee payroll deductions for taxes and government programs. These interconnected debts create a complex web of financial burdens.

This is where the AI legalese decoder can provide valuable assistance. By utilizing advanced algorithms and machine learning, the AI legalese decoder can help small-business owners navigate the intricate landscape of legal language and obligations. It can decipher complex legal terms and obligations, providing clarity and guidance to business owners who may be overwhelmed by their mounting debts.

Working at an insolvency trustee firm, I have witnessed firsthand how insolvency unfolds for small businesses. Most “business” filings we handle are not truly business-related but personal proceedings initiated once the individual has closed their corporation and still owes personal debts. In the case of sole proprietorships, the insolvency process is essentially a personal insolvency from start to finish.

During our practice of insolvency, we have interacted with hundreds of small-business owners who have been struggling for the past three years, desperately trying to stay afloat. Many have reluctantly resorted to relying on banks to keep their doors open, pay their staff and suppliers, and maintain any semblance of competitiveness. Thousands have even depleted their savings in the process.

Throughout the spring and summer of 2020, we spoke to countless small-business owners whose enterprises were crushed by the economic shutdown. They were in a state of panic. When hardened entrepreneurs, who have faced numerous challenges throughout their small-business journey, express genuine concern, it is evident that the situation is dire.

Many of these business owners were compelled to utilize various credit facilities to both keep their businesses operational and retain their employees amid the crisis. However, this reality often leads to misunderstandings and misconceptions regarding insolvency for small businesses facing the CEBA repayment deadline.

Consequently, official business insolvency statistics do not fully depict the ongoing struggles that small businesses endure. While the closure of a corporation can achieve much of what is necessary from a corporate standpoint, the debts associated with these businesses persist through the individuals who own and operate them.

Even if the government extends the CEBA deadline further or grants additional relief, small-business enterprise corporate closures and personal insolvency filings will undoubtedly surge. This impending surge highlights the urgent need for tools like the AI legalese decoder to empower small-business owners by simplifying complex legal terminologies and offering a clear understanding of their obligations.

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