Will personal debt affect business debt?

[MitchVicknair]

I owe a couple of credit cards. I plan on opening a business. Will they be able to debit my business account as they would my personal checking, or is this considered separate?

 

[Proserpina]

I owe a couple of credit cards. I plan on opening a business. Will they be able to debit my business account as they would my personal checking, or is this considered separate?

Might it not be easier to pay off the credit cards before investing in a new business?

 

[Ohiogal]

Might it not be easier to pay off the credit cards before investing in a new business?

In addition, WHAT kind of business and how will it be organized?

 

[latigo]

I owe a couple of credit cards. I plan on opening a business. Will they be able to debit my business account as they would my personal checking, or is this considered separate?

With all due respect, I fail to see why you would be asking such a question unless you are currently facing or anticipating future collection activities regarding the credit cards accounts.

If that is so, then you have no business going into business until the present business is rectified. And likely not then either.
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In response to your specific question, it is possible to isolate one's personal assets from that of a business creditors where the enterprise is structured as a separate legal entity. Such as a business corporation of a limited liability company.

However, even then there are special means whereby the business creditors can reach assets of the individual principals.

Moreover, it is very unlikely that any start up company will be able to incur financial obligations without the principals' personal guarantees.

 

[carmenmoser481]

Pay first your previous debt before opening a new business to avoid financial problem.

 

[LdiJ]

I owe a couple of credit cards. I plan on opening a business. Will they be able to debit my business account as they would my personal checking, or is this considered separate?

When you have a debt, AND there is a judgment for that debt...the debt is associated with your name and Social Security number. A properly organized separate business entity, where its funds are kept in a bank account associated with the EIN number of the business, would mostly be untouchable for personal debt. In order to be able to garnish debt in a business account for a separate business entity the creditor would have to know about that entity, and would have to have permission from the judge to "pierce the corporate veil" to go after those funds.

At the same time however, in order for you to make personal use of the business funds, you would have to either pay yourself a salary, issue yourself a dividend, or make a distribution to yourself (depending on the type of entity) which means one way or another transferring money to your personal accounts, therefore making that money vulnerable to your creditors.

You would NOT be able to use your business account to pay personal bills. So if your idea is to hide your income from your creditors...that won't fly. If your idea is to protect the money needed to run the business from your personal creditors, then that is another story.

There have been many people who have attempted to hide money from creditors, or from the child support agencies, or from alimony by leaving it in company accounts and taking only minimalistic amounts to cover personal needs, while trying to be clever and fund their lifestyle in intricate ways. Sometimes they get away with it for the short term, but in the long term that never works.

So, once again yes, the money needed to cover the daily running of the business would, in most cases, be safe...but not the money that should be your personal income from the business.

 

[FlyingRon]

The issue, other than the already alluded to attempts at fraud by shuffling things between business and personal entities to avoid liability which could indeed pierce the veils (corporate or LLC), is that anybody extending credit to new corporations is at least going to look at the solvency of the principals and perhaps require them to also be personally responsible for the new debts. His bad personal credit, previous business failures, etc... can indeed have an impact on the new business.