Statute of limitations on business debt

Updated 2026-10-24

The statute of limitations on business debt is the deadline to file suit to collect it, and it is set by state law. The period depends on the type of claim: written contracts often have longer periods than oral agreements or open accounts, and sales of goods are generally governed by UCC 2-725, which sets a four-year default. Payments, written acknowledgments, contract terms and choice of law can change the deadline, so verify the specific rule with counsel.

What the statute of limitations does

A statute of limitations is a deadline for filing a lawsuit. Once it passes, the debtor can raise the expired limitations period as a defense and the court will usually dismiss the claim, even if the debt is clearly owed. The debt does not necessarily disappear, but the most powerful tool for collecting it, a court judgment, generally does.

For businesses, the practical point is simple: if an account might ever need to go to court, know the deadline early and do not let the file sit until it is close.

The period depends on the type of claim

Each state sets its own limitation periods, and most states have different periods for different kinds of claims. The same unpaid invoice could fall under more than one category, and which one applies can be argued.

• Written contracts: a signed agreement or credit application with the essential terms. Many states give written contracts longer periods than other claims
• Oral contracts: agreements made verbally or not fully in writing, which often have shorter periods
• Open accounts: running balances from repeated sales on credit, which some states treat separately and others treat as oral or written contracts depending on the documents
• Sales of goods: generally governed by the UCC, discussed below
• Promissory notes, guarantees and judgments may each have their own rules

Sales of goods: UCC 2-725

Most states have adopted Article 2 of the Uniform Commercial Code for sales of goods. Section 2-725 sets a default limitations period of four years from when the claim accrues, which for a buyer's failure to pay is generally when payment was due. Under the model UCC, the parties may shorten the period by agreement to not less than one year but may not extend it. Some states have modified their versions, so check the enacted text in the relevant state.

Mixed contracts involving both goods and services raise a question of which rules apply. Courts often look at the predominant purpose of the contract, and the answer can change the limitations period.

When the clock starts

The limitations period usually starts when the claim accrues, which for an unpaid invoice is generally when payment became due, not when the goods shipped or when you finally gave up. On open accounts, states differ on whether the period runs from each charge, from the last charge or from the last payment. Installment agreements may create separate deadlines for each missed payment unless the debt was accelerated.

Tolling, payments and acknowledgments

Several events can pause or restart the clock, depending on state law. Tolling pauses the period in certain circumstances, such as when the debtor is absent from the state in some jurisdictions, and a bankruptcy filing affects deadlines while the automatic stay is in effect, with federal law providing additional time in some situations.

In many states, a partial payment or a written acknowledgment of the debt, signed by the debtor, can restart or extend the limitations period. The requirements are specific: some states require a signed writing, some treat a payment as an acknowledgment and some do not. A payment plan or acknowledgment agreement drafted with this in mind can protect your deadline. Do not assume a phone call or an email promise is enough.

Choice of law and where you sue

Which state's limitation period applies is not always obvious. Your contract may include a choice-of-law clause, but courts do not always apply that clause to limitation periods, which many states treat as procedural. Many states also have borrowing statutes, which can apply the shorter period of the state where the claim arose when a claim is filed in the forum state. The result can be a shorter deadline than you expected.

Some contracts also try to shorten the time to sue. Whether such a clause is enforceable, and how short it may be, varies by state and type of contract.

Practical steps for creditors

• Record the due date of every invoice and the date of every payment and acknowledgment
• Get payment plans and acknowledgments in signed writing
• Review old accounts at least yearly and flag any approaching the shortest plausible deadline
• When unsure which period applies, plan around the shorter one
• Ask a licensed attorney in the relevant state to confirm the deadline before relying on it

Where we fit

We do not provide legal advice or determine limitation periods, and we do not publish a state-by-state table because the answer depends on the claim, the documents and the facts. What we do is work accounts quickly on contingency, flag older accounts for review, and when suit is needed to preserve a claim, coordinate with a local attorney who can confirm the deadline and file with your approval.

Frequently asked questions