If you are thinking of filing for bankruptcy due to business-related debts, you might wonder if you could be held personally liable for the debt. The answer is yes, you can – but it depends on the structure of your business.
Business Structures and Personal Debt Liability
If you are the only owner of your business and you have not incorporated or set up a specific business entity, you are called a sole proprietor. If you are a sole proprietor, then you are equally liable for your business debts. Creditors of your business can attempt to collect your personal assets as well as your business assets. This could include your house, your car – whatever they need to pay off your business debts.
If your business is an unincorporated partnership between two or more individuals, your personal liability can vary. In a general partnership, which requires a simple agreement between two or more people to conduct business together, you are still responsible for your business debts. If your business is a limited partnership, where one of the partners holds more authority than the others, the partner with the most responsibility is the one who can lose personal assets if creditors come knocking.
In Washington, D.C., if your business is a limited liability partnership, partners are not personally liable for obligations. However, depending on the terms of the partnership agreement or other agreements, a partner can agree to take personal liability. Additionally, partners may be responsible for their own investments into the partnership.
If you have any questions about the various types of partnerships and whether you might be held liable for business debts, contact a bankruptcy attorney.
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