Protecting Your Business

Is there a statute of limitations for commercial collections?

On Behalf of | Jan 24, 2024 | Commercial Collections |

In the bustling landscape of commerce, small businesses in Los Angeles and throughout California often find themselves navigating the challenges of unpaid debts and overdue payments.

When faced with the prospect of recovering funds, it is important to be aware of the statute of limitations for commercial collections. This legal timeframe dictates the window within which a business can pursue legal action to reclaim debts owed to them.

Time is of the essence

Small businesses must be proactive in understanding the limitations imposed by the law. The statute of limitations is essentially a ticking clock. Once it expires, a business may lose the opportunity to take legal action. In California, the timeframe for pursuing commercial collections can vary, making it necessary for businesses to act promptly.

Civil contracts and time constraints

In the realm of small business collections, the statute of limitations hinges on the type of agreement or contract in place. For written contracts, the clock typically starts ticking from the date of the breach, which is the moment when the debtor fails to fulfill their payment obligations. This timeframe usually spans four years, providing a reasonable window for businesses to initiate legal proceedings.

Unwritten agreements and timely action

In cases where there is no written agreement, the statute of limitations is reduced to two years. This applies to oral agreements or those based on the implied understanding between the parties involved. Small businesses relying on verbal agreements must be particularly vigilant, ensuring they act swiftly within the designated timeframe.


As one of the 4.2 million small businesses in the state, as of 2022, you likely have to wear different hats and have a host of to-dos daily. When another business neglects payment, understanding the nuances of the statute of limitations can help you make informed decisions and safeguard your financial interests.