You are insolvent if you cannot pay debts when they become due or if your assets are worth less than your total liabilities.
Having a profitable business is not, in itself, a guarantee that you will not be insolvent. Cashflow problems - for example, if customers fail to pay money they owe you, or if you over-invest in equipment - could still push your business into insolvency.
The consequences of failing to take the proper steps once your business becomes insolvent can be dire and could effect you personally whether you are a sole trader or a director of a company. It is essential that proper advice is taken from a professional specialising in insolvency, at as early a stage as possible, to ensure that you minimise your personal exposure. Blindly trading on in the hope that you will be able to turn the business round may prove very costly if it does not work and you actually make the position worse.
