Understanding Business Liabilities
Share this article:
What Is a Liability?
Understanding Liabilities in Business
Types of Business Liabilities
Principle and interest payable This includes any payments due towards a mortgage or small business loan that are due within the year. Short-term loans These are loans that are due within 12 months, such as a business line of credit or bank overdraft. Accounts payable This represents debts owed to vendors, utilities, and suppliers that have been purchased on trade credit, which may be due in 30, 60, or 90 days. Until paid, these are considered short-term liabilities. Taxes payable Both state and income taxes are due within a year’s time frame, making them short-term liabilities. Unearned revenue This typically refers to cash that a firm receives before it delivers goods or renders a service. The company's liability is to deliver goods and/or services at a future date. Wages payable This includes the total amount of accrued income employees have earned but not yet been paid.
Long-term notes payable Notes payable are very similar to accounts payable except for the length of the terms for payment. When a formal loan agreement has payment terms that go beyond one year, such as the purchase of a company car or different types of business loans, it is a note payable. Deferred taxes While taxes are usually considered a short-term liability, there are times where they need to be deferred for longer than a year. Mortgage payable Mortgages are considered a long-term liability and are recorded as mortgage payable on the balance sheet. The monthly principal and interest payments due, however, are considered current liabilities and are recorded on the balance sheet.
Liabilities vs Assets
Liabilities and Expenses
Liabilities on a Balance Sheet
Pros and Cons of Business Liabilities
Analyzing Business Liabilities
3 Small Business Loans Tips
Generally, it can be easier for entrepreneurs starting out to qualify for a loan from an online lender than from a traditional lender. Lantern by SoFi’s single application makes it easy to find and compare small business loan offers from multiple lenders. If you are launching a new business or your business is young, lenders will consider your personal credit score. Eventually, though, you’ll want to establish your business credit. SBA loans are guaranteed by the U.S. Small Business Administration and typically offer favorable terms. They can also have more complicated applications and requirements than non-SBA business loans.
Frequently Asked Questions
About the Author
Share this article: