What is Bankruptcy? Easy Explanation
ByVladana Donevski
June 10,2022
When sifting through information on bankruptcy, people tend to consider it a horrifying and lengthy legal process that can leave them in permanent financial ruin from which they can never fully recover.
They may also assume that declaring bankruptcy will act as a magical off-switch and bring financial relief to anyone on the road to financial disaster by eliminating all of their debts.
Neither of these assumptions is necessarily true, as the definition of bankruptcy simply involves legally declaring that you can no longer repay your debts.
This article will seek to dispel these myths by providing information to ultimately answer the question: what is bankruptcy?
Bankruptcy Explained
Bankruptcy is a legal action whereby a person or a company can legally declare that they can no longer repay their debts in front of a bankruptcy court. By doing so, they may be granted relief by being discharged from bankruptcy.
In the United States, bankruptcy proceedings are governed by federal law under six specific chapters of the US Bankruptcy Code. Claiming bankruptcy is achieved by filing under a specific bankruptcy chapter. However, only four are meant for individuals and businesses out of six chapters, as Chapter 9 deals with municipalities, and Chapter 15 is used in foreign cases. Our focus will be on chapters 7, 11, 12, and 13.
These four different bankruptcy types are categorized based on the parties to the bankruptcy: whether they are an individual or company and the type of legal action or relief sought. Bankruptcy proceedings are achieved through two types of legal action: liquidation and reorganization.
Liquidation happens when you file for bankruptcy, and your assets are sold and the proceeds distributed to creditors to repay debts. Filing for Chapter 7 bankruptcy, which is the most common filing, leads to the liquidation of your assets. However, claiming bankruptcy is not limited to declaring that you can’t pay your debts and then asking the court to sell your assets to pay the creditors back.
Filing for bankruptcy can also mean seeking assistance from the court in reorganizing your property to allow you to pay off individual or company debts.
Reorganization bankruptcy filings are different from liquidation filings because, in most circumstances, they allow individuals and companies to keep their property.
The different bankruptcy types and their legal implications are summarized below:
- Chapter 7 - Personal or liquidation bankruptcy, best for individuals and businesses
- Chapter 11 - Business or large reorganization bankruptcy
- Chapter 12 - Debt relief for family farmers and fishermen
- Chapter 13 - Wage earner’s plan, best for individual income earners
Millions of people file for bankruptcy each year. The purpose of filing for bankruptcy and the end goal of any related proceeding is to be discharged from bankruptcy.
Common reasons for filing for bankruptcy are large medical bills, unemployment, loss of a family member, natural disaster, or business failure.
What Happens if I Declare Bankruptcy: Individual Bankruptcy Explained
Filing for bankruptcy involves submitting a bankruptcy petition to the bankruptcy court clerk. The court may liquidate or restructure some of your property depending on the type of bankruptcy you’ve claimed. The discharge will ensure that creditors will not chase that debt again in a few years if you do not have sufficient assets to cover your debts.
Chapter 7 bankruptcy, for example, will allow the court to gather and sell your assets to pay your creditors and create relief by preventing them from taking further action to collect debts, such as harassing you or pursuing legal action against you.
In case of any bankruptcy filing, creditors must stop all action, including legal action to recover the debt and broad measures such as debt collection calls, letters, and personal contact.
Your bankruptcy petition must disclose and outline all your financial and personal information, including a detailed list of all assets and liabilities, a list of creditors and the amounts owed to each party, and any income statements and tax records, including the latest tax returns.
It’s important to note that filing and administrative court fees are involved. Depending on your circumstances, the court may waive filing fees or require you to pay the fees in installments.
What Happens After Filing for Bankruptcy?
The court assigns a bankruptcy trustee to meet with you to evaluate your financial situation and arrange for the collection of your assets. The trustee then sells non-exempt assets and redistributes the proceeds to your creditors.
The total length of bankruptcy proceedings can average between three to six months. Upon completing the case, you will be discharged from your debts.
Being discharged from bankruptcy means that most remaining debts are fully forgiven. This includes almost all types of unsecured debts:
- Credit card debt
- Unsecured loans
- Personal loans
- Medical bills
- Utility bills
As well as some secured debts such as:
- Home mortgages
- Auto loans
- Tax liens
When dealing with secured debts, the ones backed by mortgage or collateral, you’ll usually have a choice to make. You can allow creditors to repossess the property that secures the debt, continue to make payments to your creditor, or pay a sum equal to the collateral’s replacement value.
Can All Debts Be Forgiven?
Not all debts will be discharged or forgiven after declaring bankruptcy. Certain types of debts will remain:
- Student loans
- Court fees
- Child support
- Spousal maintenance/spousal support payments
- Obligations arising due to fraud
- Obligations arising related to personal injury claims
- Government fines and federal, state, and local taxes
Who Can Claim Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most common claim for individuals. However, claiming bankruptcy this way may not be available to all. There is a presumption of abuse in place, meaning that you must pass the means test before filing. This test is compulsory and ensures the bankruptcy laws are not abused, and court resources are not wasted.
The means test prevents high-income earners from qualifying for Chapter 7. To pass the means test:
- Before claiming, your household income must be below your state’s median income for six months.
- You must carefully gather a list of all your expenses and divide them into allowable and non-allowable expenses.
Your non-allowable expenses are expenses that could be put towards paying off any debts. The remaining expenses and any of your disposable income must be low enough to qualify for filing.
A bankruptcy lawyer can assist you with going through your expenses and determining whether filing under Chapter 7 is the right course of action for you. Access to legal representation can be costly, but you can explore alternatives with our guide to the best online legal services.
Petitioning To Keep Your Property in Bankruptcy Proceedings
When declaring bankruptcy, you can petition to keep some of your property. This includes the furniture in your home, your clothes, and in some instances, your house and personal vehicle. What you get to keep when filing for bankruptcy could depend on the state you live in.
In the US, bankruptcy filings are governed by federal law, but the personal bankruptcy law on the excluded property varies from state to state. Therefore, the types of property you may get to keep will vary depending on where you live.
Bankruptcy lawyers are generally employed to assist you in successfully negotiating to keep your property. There is no hard and fast rule on what you will get to keep, as it depends on your circumstances.
Chapter 7 and Student Loans
Going through the bankruptcy process to relieve yourself from repaying student loans might not be the best idea, as bankruptcy won’t necessarily protect you from this obligation.
Student debt is considered unsecured debt and will not be automatically discharged by the court. Instead, you’ll need to commence additional legal proceedings known as adversary proceedings and successfully establish that the continuation of student loan repayments will cause you undue hardship.
The student loan provider may oppose your claim, and you will need to prove it according to legal standards set by the federal court.
Other Types of Bankruptcies: Chapters 11, 12, and 13 Explained
Bankruptcy chapters 11, 12, and 13 do not involve liquidation. Some companies and individuals may wish to restructure their finances to pay off their debts over the long term or decide on a different approach to bankruptcy.
Chapter 11 of the Bankruptcy Code allows companies and business partnerships to continue their operations and keep their property by asking them to create and carry out the terms of a formal plan to pay off their debts. This claim is commonly referred to as company bankruptcy, and it can force companies to completely restructure their operations.
Restructuring is usually achieved by encouraging leadership changes, closure of facilities, and the renegotiation of debts. The main benefit is that the company can avoid liquidating its assets in the short term and continue operations.
Chapter 13 of the Bankruptcy Code is also called a wage earners plan. It allows individuals to reorganize their debt through a formal debt repayment plan based on their income for the last three to five years.
Chapter 13 filing is limited to wage earners, allowing them to keep their property. Individuals must have a regular income and are expected to repay as much debt as possible through regular monthly installments.
Lastly, Chapter 12 of the Bankruptcy Code is similar to Chapter 13, except it’s only available to family farmers and fishers with regular annual income.
Final Thoughts
Bankruptcy may seem like a scary word, but it doesn’t have to be. By understanding the basics of bankruptcy and what it can do for you, you’ll be able to decide whether or not this is the right step for yourself or your business. If you’re feeling overwhelmed by debt and don’t see any other way out, bankruptcy could be the solution.
Personal bankruptcy filings may remain on your credit history report for 10 years and directly impact your ability to receive approval for future loans. Thankfully, there are alternative business loans for bad credit providers available.
Bankruptcy can provide a fresh start, but choosing the right chapter is important. If you are considering bankruptcy, it’s best to consult with an experienced attorney who can guide you through the process and protect your rights.
FAQ
Do you need a lawyer to file for bankruptcy?
You don’t necessarily need a bankruptcy lawyer to file for bankruptcy, although it’s strongly recommended. A good lawyer can assist you with investigating your claim and compiling your documents to ensure that you are filing under the correct chapter of bankruptcy and that your claim passes the means test.
They can also assist you with applying for property exemptions, which will help determine whether you get to keep your home and car after filing and help with additional proceedings if you are seeking to discharge your student loans.
Can you recover from bankruptcy?
Bankruptcy is a complex process, but it’s possible to recover from it. By rebuilding your credit and creating a solid financial plan, you can eventually get back on your feet. If you’re feeling overwhelmed, don’t hesitate to reach out for help, as plenty of resources are available. You can rebuild your life after bankruptcy and be in a much better financial position with some time and effort.
What are the advantages of filing for bankruptcy?
Getting a bankruptcy discharge is the main advantage of filing for bankruptcy. Upon discharge, all creditors must immediately stop debt collection actions such as personal collection calls and threatening acts such as disconnecting home utilities.
What is bankruptcy?
Bankruptcy is a legal status of an individual or a business that cannot repay the debts incurred to creditors. A bankruptcy filing can offer debt relief and allow you to start fresh financially. There are several types of bankruptcies, each with its benefits and drawbacks. If you are considering bankruptcy, choose the right chapter for you.
More From Our Blog
When most people think of business partnerships, they think of two or more people jointly managing daily operations. However, you can opt for another type of partnership where one party isn’t involved in day-to-day management. Enter the silent partner.
So, what exactly does this partner do, and what are the benefits and drawbacks of this type of business relationship? In this article, we will answer these questions and more.
What Is a Silent Partner?
A silent partner is an individual or entity that provides financial backing for a business venture without being actively involved in the day-to-day operations. Silent partners are also sometimes called limited partners, as their liability is usually limited to the amount of money invested even if the business declares bankruptcy.
Occasionally, if asked to, the silent business partners can provide guidance and help with networking and finding new potential business partners. It is not uncommon for silent investors to be called upon in case there is a dispute between other active partners to mediate the situation.
However, most of the time, the silent partner remains silent. By entering into such a partnership, the silent partner has full confidence in other partners to handle daily operations and grow the business, so they typically have no issues with taking the back seat in the daily management of the company.
Who Can Become a Silent Partner?
Becoming a silent partner in a small business isn’t a complicated process. Individuals, trusts, and corporations can all serve as silent partners. For small businesses and startups, silent partners can even be friends and family.
However, most of the time, it is a business or an investor that benefits from partnering with your company in one way or another. In some cases, a business may even have two or more partners that are silent, as long as it works for both parties.
We'll tell you how to find a silent business partner a bit later. But first, we’ll go over the benefits of having one and how the arrangement is supposed to work.
The Benefits of Having a Silent Partner
There are several benefits that come with having a silent partner, but the main one is financial.
Provides the Needed Capital With No Interference
First, it allows you to raise capital without having someone interfere in how your business is run.
A silent partner doesn’t interfere in the day-to-day decision-making process, either because they don't know much about the industry or lack any interest in managing daily operations. Silent partner business opportunities are ideal for those who have confidence in the management team and are interested in investments that deliver passive income.
Those investments can provide much-needed capital for businesses that are just getting started without any revisions to the business plan or the marketing strategy. In addition, this financial support can help cover unexpected costs or help the company expand its operations.
New Networking Opportunities
Silent partners, just like angel investors, are also usually well-connected and can use their networks to help the new business in a variety of ways. For example, a silent partner or investor may be able to introduce the company to potential customers or help it to secure favorable contracts.
Overall, silent partnerships can be a great way for many entrepreneurs and new businesses to get the business off the ground.
How Does Having a Silent Partner Work?
As with any other partnership, the silent partnership should be formalized in writing. However, to do so, your business must be registered first.
Registering the Business
Any business with two or more owners can either be structured as a general partnership or a limited liability company (LLC). Different states have different rules for registering these partnerships, and you should inform yourself about the relevant laws and requirements.
Silent Partnership Agreement
The next step is inking the agreement. It should include the roles and responsibilities of all parties involved, the amount being invested, the stake owned by each party, as well as how the profits are distributed.
Most importantly, it should outline the legal responsibilities of all parties. Silent partners are typically liable for losses up to their invested amount, which makes this a safe investment without the threat of unlimited liability.
It also outlines the procedure if one partner wants to sell their stake in the business or if the entire business is sold. A silent partner agreement helps to protect both partners by clearly defining their rights and obligations.
By having a silent partnership agreement in place, the partners can avoid potential conflict and ensure that their business runs smoothly. So, if you are considering entering into a silent partnership, it is important to have an attorney review the business agreement to ensure that it meets your needs and provides adequate protection.
How Does a Silent Partner Get Paid?
Typically, silent partners receive a fixed percentage of the profits on a monthly, quarterly, or yearly basis. In some cases, they may also receive a portion of the proceeds from the sale of the business.
Silent partners don’t get paid like business owners. Their earnings depend on the amount they invest in the business and what percentage of the business they own. If the business partner buys 10% of the shares with their investment, they will typically receive 10% of the profits.
The exact details of the payment terms should be outlined in the partnership agreement.
Silent Partners vs. Investors
Both silent partners and investors provide financial backing for businesses, but there are a few key differences between the two. The most important of these is the level of involvement each type of shareholder has in the business.
Silent partners, as mentioned before, are typically passive investors who do not take an active role in managing the company. On the other hand, investors often have a say in how the business is run and may provide input on major decisions.
Another key difference concerns the silent business partner's low level of risk. Silent partners are typically liable up to the amount they invest and as such don’t risk losing anything more than the actual investment. Unlike most regular investors, they are also immune from any legal action being taken against the business. Finally, silent partners typically invest their own personal funds, while investors may use borrowed money to finance their investment.
How to Find a Silent Partner?
If you're interested in finding a silent partner, there are a few places you can look. Similarly to finding an angel investor, you can start by networking with individuals and businesses in your industry.
You can also search online for directories of potential investors or work with a business broker to connect with a potential silent partner company. The silent investor doesn't have to be an individual. The business operating in your niche can also be a silent investor.
Pros and Cons of a Silent Partnership
When starting a business, there are benefits and potential pitfalls to bringing a silent partner onboard. It’s important to thoroughly examine both the pros and cons before pulling the trigger on this business arrangement.
The pros of having a silent partner in a small business:
Silent partners can provide much-needed financial support when you’re trying to get your business off the ground.
They can also have a valuable advisory role.
Having a silent partner onboard can also be helpful in building credibility and attracting other investors.
Finally, silent partners can provide an important buffer during difficult times or periods of transition. While they may not be directly involved in running the business, their support can be crucial during tough times.
Cons of Having a Silent Partner in Business
The silent partner may not be as invested in the success of the business as the active partner.
Silent partners are often not familiar with all aspects of the business, which can limit their ability to provide useful input.
Finally, it is important to remember that a silent partner has a percentage of the business but doesn’t get involved in strategizing or managing operations. As such, if the business fails, silent partners are inclined to blame the management team.
In Conclusion
Silent partnerships are common practice in the business world, and for small businesses that are just starting out, they can be a crucial ingredient for success. Silent partners offer up the cash without demanding changes to daily operations or influencing your decision-making process. However, most silent partners lack the experience and business knowledge to have an effective advisory role. Make sure this is an appropriate arrangement for your company before signing any silent partner business agreements.
By Vladana Donevski ·
June 07,2022
Setting up a business can be a lengthy process filled with challenges and tough decisions. A business bank account is required for the majority of businesses, whether it’s a small business, a sole proprietorship, or a large corporation. However, before opening an account, there are some factors you should consider to ensure that you’ve picked the best option.
We’ll go over the benefits of having a business account, how to open a business bank account with the proper documentation, as well as how to pick the account and bank that will be tailored to your needs.
Benefits of Setting Up a Business Bank Account
A business bank account can facilitate your business ventures and is a requirement for some types of enterprises. Even if you’re a sole proprietor, having an account for your business offers a number of advantages that a personal bank account simply can’t provide.
You Can Separate Your Business and Personal Funds
Having separate accounts allows you to keep better track of your company’s financial records and income. Additionally, using a single account for your business and personal assets puts your personal savings at greater risk in case legal proceedings are initiated against your company. Therefore, it’s a wise decision to protect your personal savings by having an independent small business bank account.
You Can Accept Payments via Credit Cards
Accepting and processing credit or debit card transactions is not possible with a personal bank account. Sticking with personal accounts may limit your clients' payment options, as they will only be able to pay with checks or cash, which could be inconvenient for some.
Others Can Access Your Business Funds
You probably won't be the only one who needs to use the company's funds. When you open a business banking account, you can give your employees access to it, allowing them to execute numerous financial transactions on the company's behalf. After all, using your personal bank accounts with your business partners and colleagues is inconvenient.
You Can Get Personalized Banking Assistance and Appear More Professional
Developing a business relationship with your bank ensures that you’ll receive personalized assistance in achieving your company objectives. You can obtain valuable financial guidance, and getting a line of credit or a loan will be a lot easier. Clients may also feel more comfortable making payments to a company rather than to you personally.
Decide on the Account Your Business Needs
Traditional and online banks provide a similar range of banking accounts, however, their specific services and rates may differ. The advantage of a traditional bank is that there are more products to choose from, and the customer service is better, while an online bank is more convenient for clients who prefer to do everything remotely. Your business might need more than one type of bank account, so let’s check out some of the most common options for opening business accounts.
Business Savings Account
If your company doesn't plan on spending the money immediately and would rather invest it in the future, a business savings account is the way to go. Over time, money in a savings account earns interest, however, those funds might be more difficult to access.
Business Checking Account
Checking accounts are designed primarily for receiving and making payments. In this case, finding the right checking account for your small business is crucial. You also have the option of opening an online checking account if your business doesn’t plan on dealing with cash transactions.
Business Merchant Account
Merchant accounts are ideal if your business plans on accepting debit and credit card payments. They are a secure way for you to accept electronic payments. For this type of account, you must partner with a merchant acquiring bank, which acts as an intermediary when it comes to processing credit and debit card payments.
What Do You Need To Open a Business Bank Account?
Ensure you have all of the relevant documentation ready before deciding where to open your bank account. The documents you'll need will vary depending on the legal form of your business, and we'll go over some of the most common ones.
Your Personal ID
Every signer on a business bank account must submit their Social Security number and an ID document, such as a passport or driver's license, regardless of the business type. This step is the same as opening a personal bank account.
Social Security Number or Employer Identification Number
Nowadays, the majority of banking institutions need business clients to supply their EIN to open a business savings or checking account. In order to apply for an EIN (if you don’t have one), you need to fill out an application form on the IRS website with a valid SSN. In some cases, sole proprietors are allowed to open a small business account using only their SSN.
Your Company’s Formation Documents
These documents should contain essential information about your business, like the name of the person in charge of financial management, the company’s structure, and how it will operate. For a corporation, articles of incorporation are necessary, whereas for an LLC, articles of organization are required.
Business Licenses
Before you can open a bank account for your business, the bank will request documentation that your company has all the necessary licenses to operate. Of course, the procedures for obtaining a business license differ by location, so it’s advisable to do some research before submitting your documents.
Monthly Credit Card Income
Businesses that need to process credit and debit card payments and transactions usually opt for merchant accounts. Accordingly, they need to provide the bank with their credit card revenue on a monthly basis.
Choose the Right Banks for Business Accounts and Apply
After you've decided on the types of bank accounts that are suitable for your enterprise, you'll need to pick the right bank that will suit your business requirements. We’ll list some of the key factors you should consider before making a decision.
Fees
Business banking accounts usually come with monthly maintenance fees, ATM fees, cash deposit fees, and wire transfer fees. If you exceed your monthly transaction limit, you may also be charged per-transaction costs. These fees and their impact on your business are important factors to consider when choosing the bank.
Tools for Account Management
A good business account should allow you to make payments on the go, check your balance, and transfer funds from one account to another. All of this should be possible through a user-friendly smartphone app, an online account, or a third-party application provided by the bank of your choosing.
Interest Rates
If you opted for a business savings account, then interest rates are of primary importance. Certain business checking accounts also provide interest, so be sure to compare the rates and other criteria before making a commitment.
Variety of Bank Accounts
Not only do you need a bank that offers the business bank accounts you require right now, but you should anticipate the future requirements of your business as well. For example, make sure your bank offers lines of credit or a business credit card if you think you'll need them in the long run.
Branch and ATM Locations
As part of your preliminary research, you should look into each bank’s map of branch and ATM locations. Some may be closer to your area and therefore more convenient, so it's definitely worth exploring.
Deposit Your Funds and Start Banking
You're ready to open your company bank account now that you've chosen a bank and account type, and gathered all of the paperwork for your business entity. Applying for an account shouldn’t take long, and you can do it online in most cases. It’s a good idea to double-check all the information so you don't encounter any problems with the IRS or your bank afterwards.
Depositing money in your business banking account is the final step of this process. Usually, you’ll be asked for a minimum deposit, which can be made by submitting cash, transferring money from some other account to yours (via wire or electronic transfer), or by a check payable to your business.
Final Thoughts
If you’re planning to grow your business and turn it into a profitable venture, creating a business bank account will be a necessary step toward that goal. By describing the procedure in detail, we hope to have made the process of how to create a business bank account easier for you. It just requires you to take several factors into consideration, and opt for the one that is perfect for your business needs. As a result, you’ll be able to focus on your bread and butter, safe in the knowledge that your finances are in good hands.
By Milica Milenkovic ·
July 12,2022
When you're starting a website for your small business, there are many factors to consider - from the domain name to the monthly bandwidth for the website. Many new website owners have problems estimating how much bandwidth they need. Is 5 GB a month enough? Or maybe 100 GB? Furthermore, are those unlimited plans truly unlimited? That's what we're here to answer today. Read on to learn more.
Measuring Bandwidth
Every website on the internet generates some amount of traffic whenever people visit it. When an internet page loads, it needs to pull up all the files included, like images, audio, and script files, which all need to be downloaded to the client's web browser. The same goes for any data that travels from the client's computer to your website. That traffic is called bandwidth, and it's most commonly measured in bits per second (bps).
When you decide to make a website, your bandwidth will most likely have a monthly cap set by the hosting company. This is usually presented in gigabytes (GB), although some providers measure it in megabytes (MB). If you exceed your bandwidth limit, your hosting provider may charge you extra or even shut down your website until the next billing cycle.
There's a common misunderstanding that bandwidth affects how fast your website works. However, it will not affect how many visitors you may have on your website at the same time before slowdowns happen or, worse, the website crashes. That is only determined by the actual hardware the server is equipped with, along with the physical distance from the server, i.e., ping times. That’s why many businesses choose to host their websites on a VPS platform instead of a traditional, shared server.
Determining How Much Bandwidth You Need
The average bandwidth for a website isn't universal. Therefore, in this section, we'll list a few essential factors for determining how much bandwidth to order when setting up your web hosting account.
Type of Website
Different types of websites have different bandwidth needs. A simple blog with text and a few pictures will need way less bandwidth than a video streaming site or an online store. To put it simply - the more complicated your platform is, the higher the chances it will require more bandwidth leeway.
Size of Website
Website size is another determining factor in the amount of hosting bandwidth you need. A static website with just a few pages will obviously use less than a website with hundreds or thousands of pages. The number of files on your website is important as well. If you have a lot of high-quality images, for example, those will take up more space and, therefore, use more bandwidth than plain text.
Number of Visitors
The more people visit your website, the more bandwidth it will use. However, other factors play into this as well. For example, if most of your visitors are just browsing through your website and not interacting with it much, they won't use as much bandwidth as visitors watching videos or downloading files.
Average Time Spent on Website
Another factor determining the necessary bandwidth for all websites is how much time people spend there. If your visitors are there for a long time, they’re more likely to interact with what you have on it, which means they'll be using more bandwidth than visitors who just spend a few seconds on your site before they click away.
Average Pageviews per Visit
If people only visit one page on your website, they won't use as much bandwidth as visitors looking through multiple pages. Since each page on your website uses some amount of bandwidth, so the more pages someone visits, the more bandwidth they'll use.
Calculating the Necessary Bandwidth for a Website
Now that we've gone over all the factors affecting how much bandwidth you need, let's talk about how to actually calculate it. You need to determine the average number of visitors your website has in a month by looking at your website's traffic data in the admin panel. If you don't have that, you can use a tool like Google Analytics to get it.
Then, you need to multiply that by average page views per visit and average time spent on it. This will give you the total number of page views for your website in a month.
Finally, multiply the total number of pageviews by the average page size. This will give you the total monthly website bandwidth.
Let's say you have an eCommerce website with an average of 10,000 visitors per month. Each visitor spends an average of two minutes on the site and views an average of three pages. The average page size is 500 KB.
The formula goes like this:
10,000 visitors x 3 pages/visit x 2 minutes/visit x 500 KB/page = 30 GB/month
This means you would need at least 30 GB of bandwidth per month for your website, but it would be advisable to have more. You can now start shopping around for hosting plans that offer the right amount of resources for your needs.
Optimizing Your Website's Bandwidth Usage
There are a few things you can do to reduce the amount of bandwidth your website uses. One of the most important things is to optimize your images. This means saving them in a suitable format and using the appropriate resolution. You should also consider using a content delivery network (CDN) to serve your static content. This can help reduce the load on your server and, as a result, your bandwidth usage.
A web hosting plan should have enough resources for your website. This includes things like storage space, CPU power, and, of course, bandwidth. Your monthly bandwidth limit is fundamental if the website attracts a lot of traffic or uses a lot of data-heavy content, like videos and high-resolution images.
If you're not sure how much data you need, you can use the formula from the section above to get a rough estimate and plan accordingly. Remember that this is just an estimate, and your actual bandwidth usage may be higher or lower than shown here. It's always best to err on the side of caution and choose a hosting plan with more resources than you think you need.
Bandwidth Myths Debunked
We've mentioned some common misconceptions about server bandwidth and how it affects websites. Let's look at some other popular cases of false advertising often used by hosting providers to lure inexperienced customers.
Myth 1: More Bandwidth Means More Speed
Many people believe that having more bandwidth will make their website faster. However, this is not necessarily true. Bandwidth only affects the speed of data transfer, not the actual loading time of your website. This means that, if your website is already fast, adding more bandwidth won't make it any quicker. The only thing that matters is the hardware your web host is using - i.e., its processing power and how fast the storage is.
Myth 2: You Only Need Enough Bandwidth For Your Average Traffic
Another common myth is that you only need enough bandwidth to cover your average traffic. However, this isn't always the case, as you can easily exceed this website bandwidth limit. If you have traffic spikes, you may need more bandwidth to accommodate them. It's important to keep this in mind when choosing a hosting plan.
Myth 3: You Don't Need Bandwidth If You're Not Getting Much Traffic
Likewise, many people believe you don't need much bandwidth if you're not getting much traffic. Again, a common misconception. Even with low traffic, you may still need a lot of bandwidth if you're using data-heavy content like videos and high-resolution images on each web page.
Myth 4: Bandwidth Can Be Unlimited
You might've seen a web hosting company advertising plans with unlimited bandwidth. Web hosting bandwidth is a finite resource. Most web hosts will impose limitations or even shut down your website if you use too much bandwidth. Hosting companies often advertise unlimited bandwidth, or unmetered bandwidth as it's often called, for plans dedicated to hosting WordPress websites and blogs. But, there's often a caveat: Fine print stating you'll either have limited speed after X amount of traffic or imposing some other limitation to what you can do with the website.
As you can see, there are a lot of myths about bandwidth. It's important to understand how bandwidth works so you can make sure you have the right amount for your website.
Conclusion
We hope this article has helped you understand bandwidth and how it affects your website. It's a good idea to have an estimate of how much website-hosting bandwidth you need before launching your platform. Keep in mind that your actual bandwidth usage may be higher or lower than average. It's always best to err on the side of caution and choose a hosting plan with more resources than you think you need. This way, you won't have to worry about running into any problems down the road.
By Bojan Jovanovic ·
June 10,2022
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