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National Debtline

Advice you can trust

Business status

Why it is important

Before you start to deal with your debts, it is important to know what your business status is. This helps you work out your budget and understand which debt options you have.

Status types

  • If you run your own business you will normally be a sole trader, a partner in a partnership or a director of a limited company.
  • When dealing with business and personal debts it is important to know your business status.
  • This page gives a brief description of each status.
  • If you are unsure of which status you are, contact us for advice.

Sole traders

  • You are a sole trader if you are an individual and you work for yourself.
  • You are personally liable for all of your business debts.
  • This means if you do not pay your creditors, your business and personal assets could be at risk.

Limited companies

  • A limited company is a separate legal entity from its directors and shareholders.
  • It must be registered with Companies House and send them accounts each year.
  • You are not usually personally liable to pay back company debts, unless you have given a personal guarantee or committed a director's offence.

 

Partnerships

  • This is where two or more people carry on a business with the aim of making a profit.
  • All partners are liable for all business debts apart from their own income tax and National Insurance contributions.
  • This means if you do not pay your creditors, your business and personal assets could be at risk.

Your budget

  • Once you know your business status you can do a budget.
  • You need to work out a budget before tackling your debt problems.
  • After working out your income and outgoings for your business and  household, you will be able to see how much you have left over.
  • You can then decide on the best way to deal with your debts.