Understanding Business Debt Responsibility: Am I Accountable?
A pressing question often asked by business owners is, “Am I Responsible For the Debt of My Business?” The answer to this question, however, is not straightforward and varies depending on the structure of your business, the type of debts incurred, and your role in the company.
Types of Business Structures and Debt Responsibility
1. Corporations and Debt Responsibility
If you have chosen to run your business as an incorporated entity, certain obligations might still fall on you personally, especially when it comes to debt. Here are the three common scenarios:
Guaranteed Debts: In most cases, shareholders are required to provide personal guarantees for specific debts. This often applies to bank loans, mortgages, equipment or vehicle financing or leases, and certain suppliers may also require personal guarantees.
Director’s Liabilities: As a director of a corporation, you might be personally liable for some debts. These often include unremitted payroll deductions, HST, penalties, and interest. Directors may also be accountable for environmental damages caused by the company. However, corporate income taxes are not a personal obligation of the directors.
Unpaid Wages: The responsibility for unpaid wages can also fall on the director, depending on the province where the corporation is registered.
2. Sole Proprietorships and Debt Responsibility
In the case of a sole proprietorship, you are personally responsible for all the business debts.
3. Partnerships and Debt Responsibility
If you are part of a partnership, both you and your business partner are jointly accountable for all the debts of the partnership, not just your own portion.
Dealing with Business and Personal Debts
Business owners frequently require debt solution options that address both personal and business debts. It’s impossible to manage one without handling the other. Therefore, consulting with a Licensed Insolvency Trustee experienced in business-related debts is highly recommended.
Choosing the Right Insolvency Practitioner
At Bankruptcy Canada, we understand the personal impacts of severe financial stress.
Here’s what you can expect from us:
- A personalized approach, not an assembly line process.
- Prompt responses and resolution of issues from our supportive and experienced team.
- Comprehensive review of your debt solution options, including filing a consumer proposal or personal bankruptcy.
- We assist Canadians with overwhelming debt in making a fresh financial start.
Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you.
We offer free consultations to review your financial situation and practical debt resolution options.
