Business Halacha: Business Loan in My Name


tdbank1Question: I took out a loan in my own name for a small joint business venture. If the venture falters and the loan has to be repaid from personal assets, does my partner have to repay half the loan?

Answer: If one partner borrows for the purpose of a joint business, the other partner is also obligated, even though he did not participate in procuring the loan. This is because the first partner is viewed as an agent of the second partner, provided that the second partner admits that the loan was taken on behalf of the business or that there is proof for this. (C.M. 77:2)

The Rama, however, follows an opinion that if it was not evident at the time of the loan that the loan was taken on behalf of the partnership, the second partner carries no personal liability, even if he later admits that the loan was taken on behalf of the partnership.

The consensus of later authorities is: If the loan was explicitly taken on behalf of the partnership, or if the first partner borrowed the money upon the instruction (or with the consent) of the second partner, or if the money was invested directly in the partnership, the second partner is obligated. (Shach 77:9; Nesivos 77:4)

If the second partner questions whether the loan was taken for the purpose of the joint business or for personal use of the first partner, the burden of proof is on the first partner.

Authored by Rabbi Meir Orlian

These articles are for learning purposes only and cannot be used for final halachic decision.

The Business Halacha email is a project of Business Halacha Institute ( and is under the auspices of Rav Chaim Kohn.

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