Business Liabilities Guide
Record and manage your business loans, commercial mortgages, and other business obligations as part of your estate plan.
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What Are Business Liabilities?
Business liabilities are debts and obligations that belong to your business entities rather than to you personally. These include commercial loans, business mortgages, trade credit, tax obligations, and other financial commitments. While the business itself is liable, many business debts carry personal guarantees that make them relevant to your estate planning.
Personal vs Business Liabilities
Record debts in the correct category based on who is legally liable:
- Personal mortgage, car loan, credit card: use Personal Liabilities
- Business bank loan, commercial mortgage, trade credit: use Business Liabilities
- If a business debt has a personal guarantee, record it under Business Liabilities and note the guarantee
- Director’s loans (money you lent to or borrowed from your company) belong in Business Liabilities
Types of Business Liabilities
Commercial Loans & Mortgages
Bank loans, commercial mortgages, and asset finance used to fund business operations or purchase business property. These are typically secured against business assets and may carry personal guarantees from directors.
Trade Credit & Payables
Amounts owed to suppliers, vendors, and service providers for goods or services received. Trade credit is a common form of short-term business financing and is typically unsecured.
Tax Liabilities
Outstanding corporation tax, VAT/GST, payroll taxes (PAYE/NI), and other tax obligations. Tax debts are treated as priority creditors in insolvency and may carry personal liability for directors in some circumstances.
Director’s Loans
Money lent by a director to the company, or borrowed from the company by a director. Director’s loans can carry tax consequences for the company or the director, so seek professional advice on how yours is treated.
Key Terminology
Understanding these terms will help you manage your business liability records effectively.
Personal Guarantee
A commitment by a director or owner to repay a business debt personally if the business cannot. This makes the debt part of your personal estate liability.
Secured Debt
A liability backed by specific collateral (property, equipment, or other assets). If the business defaults, the lender can seize the collateral to recover the debt.
Unsecured Debt
A liability not backed by specific collateral. In insolvency, unsecured creditors are paid after secured and preferential creditors from remaining assets.
Director’s Loan Account
A running record of money a director has lent to, or borrowed from, the company. An overdrawn account means the director owes the company, and the balance can carry tax consequences, so seek professional advice.
Creditor
The person, company, or institution to whom the business owes money. Examples include banks, suppliers, HMRC, and individual lenders.
Collateral
An asset pledged as security for a loan. If the borrower defaults, the lender has a legal right to seize the collateral. Common examples include property, equipment, and inventory.
How to Add Business Liabilities
Recording your business liabilities ensures your estate plan accounts for all obligations and helps your executors understand the full financial picture.
- Go to Asset Management → Business Asset Tracker → Liabilities
- Click "Add Liability"
- Select the business entity this liability belongs to
- Enter the liability name and select the type
- Add the creditor or lender name
- Enter the current balance and currency
- Note whether the debt is secured and describe any collateral
- Record any personal guarantee details
- Upload loan agreements or relevant documentation
- Save the record to your portfolio
Document Checklist
Keep these documents accessible for each business liability:
- Loan agreement or facility letter
- Personal guarantee documentation
- Recent account statement showing current balance
- Security or charge documents (for secured debts)
- Repayment schedule or amortisation table
Upload Documents
Personal Guarantees & Estate Planning
Personal guarantees on business debts can have significant implications for your estate. If a business debt carries your personal guarantee, the creditor may make a claim against your personal estate if the business cannot repay.
- Identify all business debts with personal guarantees and record them
- Note the guarantee amount, which may be for the full debt or a capped sum
- Personal guarantees survive death and become claims against your estate
- Creditors with personal guarantees rank alongside other unsecured creditors of your estate
Seek Professional Advice
Frequently Asked Questions
Do business liabilities reduce my estate value?
Business liabilities generally belong to the business entity rather than to you personally, although a personal guarantee may change that. Where you own shares in a limited company, the company’s liabilities typically reduce the net value of those shares, which can affect your estate value indirectly. The position varies by jurisdiction and entity type, so consider confirming it with a professional.
What happens to business debts when a sole trader dies?
A sole trader is usually personally liable for the debts of the business. When a sole trader dies, those debts commonly become debts of their personal estate and are generally settled before any assets are distributed to beneficiaries. The detail depends on the jurisdiction, so consider consulting a professional.
Should I record director’s loans here?
Yes. A director’s loan account (whether you owe the company or it owes you) should be recorded as a business liability. If the company owes you money, your estate can claim that debt. If you owe the company, your estate must repay it. Director’s loans can carry tax consequences, so seek professional advice on yours.
What if my liability type isn’t listed?
The liability type list is maintained centrally and covers multiple jurisdictions. If your specific type isn’t available, select the closest equivalent and describe the details in the notes field. Country-specific types are shown when you select the country.
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