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Is My Business Liable for My Personal Debt?

Are you an entrepreneur or small business owner dealing with personal debt concerns? Even at the top of your professional game, unexpected events can leave you struggling to keep up with your personal finances. You're likely anxious about how your personal financial issues could affect your business operations. Here are some facts which may provide some insight.

Business Structures

How your business is structured will determine if your business can be held liable for your personal debts. Here’s a look at the most common situations.


  • Sole proprietorships and partnerships. If a business operates as a sole proprietorship, the owner and their business are legally the same entity. This means you’re personally liable for the debt you accumulate in your business and personal life. If you have business debts, creditors can take your personal assets to repay your debts and vice versa. The same rule applies if your business is a partnership. Any personal debt you or your partner incur can be claimed against the business's assets and individually.

  • Corporations and LLPs. Corporations and LLPs are separate legal entities from their owners. If your business is a corporation or an LLP, you and any shareholders or partners in an LLP will generally not be concerned with any of your partners' or shareholders' personal liabilities except for the individual’s interest in the corporation or LLP. The potential of personal liability should be addressed preferably at the time of incorporation or formation of the LLP.

Personal Debt and Business Loans


If you’re an entrepreneur and want to start your own business, your personal debt may affect your chances of getting a loan. Most lenders review various factors in your financial history when considering whether to grant you a business loan. They will assess your track record, including length of time in business; Income tax obligations filed and paid; security which may be pledged to secure the business loan applied for; status of other current debts, credit rating, and previous bankruptcies.


Generally, if an individual operates a sole proprietorship or in a partnership, there can be a higher rejection of applications for a credit facility.

If your personal debt is affecting your business goals, contact a licenced insolvency trustee (LIT). They’ll analyze your situation and provide personalized debt relief options. The LITs at D. & A. MacLeod Company Ltd. offers various services, including credit counselling and virtual assistance for customers who wish to file a consumer proposal.


Personal and Corporate Debt Help in Ottawa & Across Eastern Ontario


If you’re worried about personal or liability for corporate debt, the D. & A. MacLeod Company Ltd. team has your back. Our licenced insolvency trustees and staff have helped thousands of clients overcome their financial difficulties and turn their lives around for over 70 years.


Contact us today to set up a free, no-obligation consultation to discuss your situation to arrange an in-person or a virtual meeting.

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