Boca Raton, FL – Following the massive economic havoc of 2008, scores of businesses have been trapped in a vicious cycle of debt. When it comes to business, debt is something that must be kept within control all through its lifetime. Massive commercial debt could be big trouble, perhaps even causing you to shut down your business. However, times are tough and businesses can’t help but accumulate debt from their lenders. When debt amount gets out of hand, a business needs to take immediate steps and there are many things a business can actually do to lower the debt level. Under such circumstances, it’s always advisable to ask legal questions before you proceed any further. Business debt is regulated by the same set of laws as individual debt. Nevertheless, there are certain differences between personal debt laws and commercial debt. When a business has overdue taxes, criminal charges can be laid on the business proprietor.
LLCs and Business Debt
LLC or a limited liability corporation can be appointed to handle both debt and legal responsibility for a business. In event that the LLC is prosecuted and loses the case or becomes bankrupt, the business debt can solely be collected from the LLC. Forced sale of assets, for example; business equipment and buildings, garnishment of commercial accounts can help in the debt collection process.
The Corporate Veil and Debt Collection
A “corporate veil” refers to a situation when an organization is regarded as an individual legal body – separate from the organization’s stakeholders and owners. Then, the organization is accountable for its debts and not the people who own it. A LLC or limited liability corporation just provides debt and fiscal protection if the “corporate veil” is not perforated. When a person makes use of the LLC to meet individual expenses, fails to meet LLC formalities, or makes LLC bill payments using a personal account. The limited liability of the LLC can then be accosted by creditors, who can take legal steps against the individuals for the unpaid business debt.
Commercial Debt Collection
Unlike personal debts, business debt cannot be repaid using wage garnishment. Nevertheless, creditors can apply liens against the commercial property and equipments. Business debt collection is regulated by the FDCPA or Fair Debt Collection Practices Act. For instance, debt collectors seeking to collect business debt must give a detailed billing of the unpaid debt, penalties and interest connected with the debt, and evidence that they hold the right to debt collection. Nobody can face legal penalties for outstanding business debt except for due service taxes.
Business Debt Foreclosures and Reclamations
A business can even enlist mortgage debt. In case a business defaults on its mortgage payments, business property can face foreclosure. Purchase agreements can include a loan provided by the seller to buy resources. If the purchaser fails to make his payments in time, the business debt can be paid off by the seller foreclosing the inventory instead of the debt.
Business Debt and Due Wages
A lot of states include laws that necessitate employers to hold sufficient money to make employee payments. Employers are not allowed to hold back wages as a business debt to be compensated later as the employee continues with his work. Due wages are not regarded as business debt, but as a conceivably criminal deed. Employees may take legal steps for due wages once a business shuts down. An organization is not allowed to refuse to make wage payments to serve other business debts.