One of the realities about owning a business is that you will probably have to take out a loan at some point,
whether it’s to expand your company or to keep operations running until you turn a profit.
You may also owe a contractor for work done on your business property.
The problem, however, is that if you don’t pay those debts, your creditors can take you to court and secure a lien, which is a legal claim against business property or business assets.
Common Liens Used Against a Business
There are several types of business liens, including:
- Judgment – A creditor can sue you in small claims court and obtain a judgment, which gives the creditor the right to obtain the money you owe. After a court issues a judgment, it places a lien on your business property, which means that if you don’t pay the debt, the creditor who won the lawsuit can seize your assets and sell them.
- Tax – A state or federal tax authority can put a tax lien on your business property to pay for any outstanding tax debts. Tax liens apply to all business property, including real estate, cars and all business equipment. Typically, the tax authority sends a letter warning you of an impending lien if you don’t pay the debt. The lien can include all interest and penalties as well as the original amount of the debt.
- Security Interest – This is a voluntary type of lien, which means that you agree that a lien is possible at the time that you enter into the debt. So if you purchase more real estate for your business, your creditor immediately gains security interest in that real estate. If you don’t pay that creditor, it can seize the property to pay for that debt.
- Contractor’s Lien – If a contractor performs work on your business property and you fail to pay the invoice, the contractor can obtain a lien against your business to recover the debt. This prevents you from selling or refinancing your business without first paying the debt. In extreme cases, the contractor’s lien can force you to pay off assets to settle the debt.
- Blanket – A blanket lien is the most serious type of business lien, because it gives your creditor the power to seize all your business assets as well as your personal assets if you default on that loan. Other types of business liens only apply to business property and assets, but a blanket lien gives creditors the highest level of control over your finances.
The Importance of An Experienced Business Attorney
Liens are often a complex area of business law, and if you don’t secure the services of a business lawyer who has handled these challenges, you may lose your entire business. The Law Offices of Peter M. Feaman, PA have the resources to help you resolve a business lien issue. Please call us today at 561-734-5552 to schedule a consultation.