Are sole proprietors personally liable for business debts?
Legally, a sole proprietorship is inseparable from its owner — the business and the owner are one and the same. As a result, the owner of a sole proprietorship is personally liable for the entire amount of any business-related obligations, such as debts or court judgments. This means that if you form a sole proprietorship, creditors of the business can come after your personal assets — your house or your car, for example — to collect what the business owes them. For more information on personal liability, including examples, see Sole Proprietorship Basics. Back to top Article Content 2004 Nolo.
Legally, a sole proprietorship is inseparable from its owner — the business and the owner are one and the same. As a result, the owner of a sole proprietorship is personally liable for the entire amount of any business-related obligations, such as debts or court judgments. This means that if you form a sole proprietorship, creditors of the business can come after your personal assets — your house or your car, for example — to collect what the business owes them.
The short answer to this question is – Yes. As mentioned above, for tax purposes, a sole proprietorship is not viewed as being separate and detached from its owner. From a legal standpoint, the result is the same. Therefore, any and all liability arising out of business relationships will fall directly on YOU. That includes liability arising from any business debts, or any court orders or judgments. Thus, your personal assets, such as your home, or your cars, might be a target for creditors seeking to satisfy the debts arising out of the business, if they are not paid directly. The Spring Attorneys at Smith & Garg will meet and consult with each client individually, discuss their business strategies, and arrive at a solution that best suits their needs. If you need a skilled business attorney, you owe it to yourself and to your business to consult with attorneys who have your best interests as their top priority. The Smith & Garg attorneys proudly serve all of North Houston and are sim
Legally, a sole proprietorship is inseparable from its owner – the business and the owner are one and the same. As a result, the owner of a sole proprietorship is personally liable for the entire amount of any business-related obligations, such as debts or court judgments. This means that if you form a sole proprietorship, creditors of the business can come after your personal assets – your house or your car, for example – to collect what the business owes them.
