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Am I Personally Responsible for my Business Debt?
Often, even though a person’s business is failing, their personal finances are in good shape. When this happens people often want to know what their options are for bankrupting their business and walking away from it. In some cases this is possible, and in others it is not. So when are you personally responsible for business debt?
If your business was incorporated then you are not personally responsible for any outstanding debts, though the Director of the Company is personally responsible for any outstanding source deductions or GST. The only way you can be responsible for other debts of an incorporated company is if you sign a personal guarantee. This means the company could file bankruptcy or a proposal and it would not affect the shareholders.
If however you were running your business as a sole proprietorship, meaning it is not incorporated, then you are responsible for all business debts. If this is the case then any insolvency filing to deal with these debts will be a personal bankruptcy or proposal. All of your personal finances will come into play and you could lose assets to cover business debts.