Whether you’re an owner and director of a limited liability company (LLC) or a self-employed sole trader in Little Rock, you may have borrowed money to support the company’s cash flow at one point. When your business is doing well, you have the money to pay off the debts. If your business starts to struggle, however, you may find that money is no longer available, and you’re unable to maintain repayments to loans. Under this situation, you many need to contact a bankruptcy attorney.
If you’re wondering if you’ll be liable for your company’s debts, here’s some basic information on business debt liabilities under certain circumstances:
If You’re a Limited Liability Company Director
If you’re an LLC director and you borrowed money from a bank in the company’s name, the company is liable for the repayment of the debt. In general, the directors aren’t liable for any outstanding debts taken in the company’s name if it fails.
If You Gave a Personal Guarantee
It has become common for banks to ask the directors of small to medium sized LLCs to give a personal guarantee that the banks will receive repayment if the company is no longer in a position to do so. If you’re a director and you personally guaranteed a credit, you’ll be personally liable for repaying the debt if the business becomes unable to repay the loan. This rule is applicable even if you made the guarantee in the name of the company.
If You’re a Self-Employed Trader
If you’re a self-employed trader, any borrowing your company will take on will be in your personal name as the business owner. If the business can no longer afford to repay the loan, you’ll be personally liable for repaying the debt.
There are other circumstances when a company owner can be held personally liable for a business debt. Contact a local bankruptcy attorney to know more about these other circumstances.