Will You Be Personally Responsible For Paying Business Debt?
Mounting debt whether it be personal or business is not ideal and can make life much more stressful. When you own a business you and you accrue debt it is incumbent that you pay it off. However, if your business is not bringing in enough money to pay your debt, you may be wondering what you should do and if that business debt will need to be paid with your assets and wealth. The answer to this question is “potentially”. Your personal liabilities with respect to your business debt will come down to two things, your business structure and your own personal reassurances.
Determining how to handle overwhelming business debt can be complicated and unnerving. Working with a business bankruptcy attorney can help make your financial situation more manageable. Your attorney can advise you on what legal remedies are available to help you get things back on track. At the Law Office of Harry D. Lewis, the trusted and strategic New York City business bankruptcy attorney can provide you with valuable legal guidance on your options to handle your debt.
When Is a Business Owner Responsible for Their Business Debt?
The structure of your business will be a pertinent factor in determining your personal responsibilities with your business debt. For example, if your business is a sole proprietorship or if you are a partner in a partnership, then your personal finances are subject to creditors calling for business debt payments. But, if your business is defined by a corporate structure, then your personal finances are separate from your business expenses. Therefore, you would not be accountable to creditors with your personal funds. This is true with some caveats.
If you have a corporate structure and your shareholders fail to follow established guidelines and procedures, you may lose that protection. There are certain formalities that must be adhered to for a corporate structure to be in good standing and be able to shield its shareholders. Not paying taxes and state fees, failure to hold annual meetings, creating bylaws but not following them, or misuse of company funds are all examples of instances where what is known as “piercing the corporate veil” can exist and shareholders or owners may be vulnerable to creditor badgering for business debt payment.
In addition, your own personal assurances can also put your private funds at risk. If you own a business and you sign a financial agreement where you provide your personal guarantee, then your finances are on the line when it comes to your business debt.
Speak to a New York Business Bankruptcy Attorney Today
Every decision that a prospective and current business owner makes with respect to taking out loans, making purchases, structuring organizations, and signing agreements must be taken seriously. Should a business venture not work out and outstanding debt be on the table, a business owner may have to use their personal funds to pay off the financial liabilities of their business. For assistance with business bankruptcy in New York, please connect with the New York business bankruptcy lawyer Harry D. Lewis for support. You can schedule a free consultation by calling 212-859-5067.