If you’re a business owner who is struggling to pay off personal debt, you may be wondering if that can affect your business. Your situation will entirely depend on the type of business entity you have and the amount of debt you owe. Our New York debt relief attorneys explain in which circumstances your business can be liable for your personal debt.
Sole Proprietorship & Partnerships
If you’re operating your business as a sole proprietorship, you and your business are legally the same entity. This means that you are personally liable for the debt you accumulate in your business and your personal life. For example, if you owe business debts, creditors can take your personal assets to replenish your debts. On the other hand, if you owe personal debts, creditors can take your business to replenish your debts.
“Inside-out” liability also applies to general partnerships. Creditors can go outside (or inside) the business to satisfy their claims. With a general partnership, a partner's personal creditors can force the liquidation of the business to claim that partner's equity in the business.
Corporation business owners or majority shareholders don’t need to worry about their personal debt intertwining with their business debt. A corporation is a separate legal entity from its shareholders. For such reasons, corporations or LLCs can protect your personal assets from debts and lawsuits against your business. If you are sued for personal debt, you can lose personal assets, but your business will remain safe.
New York Debt Relief Attorneys
If you or your business is dealing with overwhelming debt, you have options. Our New York debt relief lawyers have helped companies and individuals find debt repayment solutions tailored to their unique situation. Whether you need help putting a stop to creditor harassment or you want to improve your business’ finances, we are here to help you.
Contact our New York debt relief lawyers today at (516) 217-4488 to schedule a consultation!