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Am I liable for my business partner’s credit cards?

Even if you’re not related to the cards in any way, the business you own together might be liable – check the terms on the card

Summary

If your business partner opened credit cards in their name, the business you created together might be liable for them even if you’re not an authorized user on the cards or you signed no personal guarantee.

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Dear Your Business Credit,

If I, as the managing member and co-owner of an LLC, wish to dissolve a company, am I legally liable for credits cards issued to another member of the business in which I signed no personal guarantee, am not authorized to use, and that aren’t even used in the operation of this particular entity? – Carlos

Dear Carlos,

I am not an attorney and cannot give you legal advice. However, based on what you are telling me, it does not appear you have any personal connection to the credit cards that were issued to your business partner.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: What’s a fair card arrangement in a business partnership?

Establishing liability on business partner’s cards

As you mention, you did not guarantee them and you are not authorized to use them. The cards are not used for business purchases. I can’t see how you would be liable for them in any way.

However, it is possible the business – in which you are an owner – could be listed by your partner as a responsible party for some of the debts. If the cards have “joint and several” liability and the business was one of the responsible parties for the debt, then the creditor can approach either your partner or the business for the debt owed.

If you know that the charges on the card were not for business purposes, the business could then pursue your partner legally to recoup the funds.

That could be a hassle, but if you’re talking about a substantial amount of money, it may be worth it. If you know which cards your partner is using, call the card issuers and ask them what type of liability the card comes with, so you know where you stand.

The business credit cards listings on this site also show you the card member agreements for particular cards.

Reminder: Know your business partner well – in advance

What if you don’t know which cards he or she is using? If you are on good enough terms with your partner to talk about your concerns, I’d ask which cards he or she is using, so you can check on what type of liability they come with.

If your partner has ever submitted credit card receipts for reimbursement for the occasional business purchase, those records might also point you in the right direction.

Your note is a powerful reminder of why it’s so important to get to know anyone you are going into a business partnership with really well before you start forming business entities together, open a bank account together or make business purchases.

No matter how much you try to keep your financial lives separate, you are going to be tied to each other financially to some extent. It’s no fun to worry about an irresponsible partner creating havoc in your life in the future.

See related: Who is responsible for business card debt?

Seek legal advice

Since you are probably working with an attorney on the business dissolution, I would discuss your concerns with your lawyer, as well.

Your business formation documents may have some information as to how the business’s debts will be handled if the business is dissolved.

If there is joint and several liability on any of the cards, and the business could be responsible for the debts, your attorney will want to take that into account as you work out the financial aspects of closing the business. Good luck!

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Published: April 12, 2019

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