Can creditors come after your assets as the business owner?

On Behalf of | Aug 24, 2020 | Business Law |

Doing business always comes with some degree of risk. You might have affordable supplies to manufacture a product now but will run into supply chain issues later. Demand for certain products or services can decrease substantially as trends change.

It’s even possible that personal issues, like health problems, lead to you going out of business to focus on yourself instead. If your company closes while it still carries debt, will you have to worry about creditors coming after your personal assets?

Different business structures give different degrees of protection

Depending on what kind of business you created, it’s possible that creditors may be able to come after your personal assets. Incorporation is frequently a step taken by individuals who want to separate their personal assets from their business.

Those with less formal business structures may be at more risk of creditors coming after their personal assets, but it is worth noting that creditors can sometimes ask the courts to pierce the corporate veil and hold a corporation’s owner accountable for unpaid debts when they dissolve the business.

How you manage your finances will also affect that liability

It is generally a good practice to use a separate bank account and separate financial resources for business spending and personal purchases. Using your personal bank account or assets for business could mean that creditors have an easier time coming after your personal assets if the business fails.

Whether you are about to start a company or to dissolve one, getting the right legal support during this complicated process can reduce the risk that you have a creditor lawsuit and other financial hardship.