Can contractors be held personally liable for business debts?

Contractors, especially those operating as sole proprietors, can indeed be held personally liable for business debts. This is due to the nature of sole proprietorships, where there is no legal distinction between the owner and the business entity. As such, any debts incurred by the business are also the personal debts of the owner. This means that personal assets can be at risk if the business fails to meet its financial obligations.

In contrast, incorporated businesses generally provide a level of protection to their owners through limited liability, which differentiates personal assets from business liabilities. However, this protection is not available to sole proprietors or partners in a general partnership, which is why understanding this distinction is crucial for contractors in managing their financial risk.

Moreover, the idea that contractors could only be liable for debts related to large projects is misleading, as liability does not depend on the size or scope of a project but rather on the business structure they operate under. Understanding liability is essential for contractors to make informed decisions about their business structure and to protect their personal assets accordingly.