A business creditor may pursue your personal assets in some circumstances, but business ownership does not automatically make you personally liable. Your liability may depend on your business structure, personal guarantees, and how you handled business and personal finances. When Can Business Debt Become Personal Debt? Business debt and personal debt are generally separate when a business is properly structured as an LLC or corporation. However, that separation is not absolute. You may become personally responsible if you operate as a sole proprietor, personally guarantee a business debt, co-sign an obligation, or engage in conduct that creates a basis for personal liability. The specific circumstances matter because a creditor cannot simply pursue your personal assets because your business failed to pay a bill. There generally must be a legal basis for holding you personally responsible for the obligation. Does an LLC Protect Your Personal Assets? An LLC generally creates a legal separation between the business and its owners. This means that business creditors typically seek payment from business assets rather than the owner’s personal property. However, forming an LLC does not guarantee complete protection. Personal guarantees, fraud, improper conduct, or failure to maintain a meaningful separation between personal and business […]
