Who is liable for the debts of a business?

In California, a business’s debts are primarily the responsibility of the business itself. Generally speaking, creditors cannot seek repayment from people or entities that do not have a legal ownership interest in the business. If the business is a sole proprietorship, the individual who owns and operates the business is liable for the debts of the business. This means the individual is personally responsible for repaying any debts the business may incur. If the business is a partnership, all of the partners are jointly and severally liable for the debts of the partnership. This means each partner is individually responsible for the full amount of any debts the business may incur. If the business is a corporation, the corporation itself is liable for the debts of the business. Corporate officers, directors, and shareholders are generally not liable for the debts of the corporation unless they are personally liable for the debt. Finally, any person or entity that provides a guarantee for the debt may also be liable for the debts of the business. A guarantee is a promise to repay the debt if the business is unable to do so. In summary, the liability for the debts of a business generally falls on the business itself or any individual or entity that provides a guarantee for the debt.

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Who is liable for the debts of a business?

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