When buying a business, you may also be purchasing assets. If any of the business’s assets have liens, you could become responsible for satisfying these liens. What are liens and what are your responsibilities when purchasing a business? If you are considering buying a business, it is important to perform proper due diligence to understand the business’s debts and obligations. If you fail to do your due diligence, you could find yourself responsible for the business’s liens and debts.
What is a lien? A lien is a legal document that gives someone a claim to your property as collateral to repay a debt. If you have a mortgage, for example, the bank has a lien on your home that dissolves when you pay off the mortgage. If you have an auto loan, the bank will have a lien on your car that treminates when you pay off the car debt. If a person owes a debt to a creditor and the creditor gets a judgement against the debtor, the creditor can place a lien on the debtor’s property until the debt is paid in full. There are several ways that a debtor can remove a lien. One way is by paying off the debt. Other ways that a lien can be removed includes settling the debt, by disputing the lien, or by correcting an erroneous lien. The IRS can also place a lien on a person’s property if the person fails to pay their taxes.
If you are buying a business and will acquire property in the transaction, you may want to check to make sure that there are no outstanding liens on the property. You can perform this due diligence yourself, or you can hire a business law firm like Legal Counsel, PA in Orlando, Florida to perform this due diligence. A lien on property can reduce the value of that property because the property cannot be sold without the lien being satisfied. When buying a business, it is important to protect your interests. Legal Counsel, PA is a business law firm in Orlando, Florida that may be able to assist you.
Types of Liens That Attach to Assets
There are several types of liens that can attach to assets. There are several ways that a potential buyer can investigate a business to see if these liens exist. There are UCC liens, tax liens, and judgement liens. UCC liens are liens that are placed by a creditor on a property when a person takes out a loan. If a person has a mortgage, or a car loan, a UCC lien is the collateral on the tangible personal property as security for repayment of the loan. If a business takes out a loan to purchase equipment, a UCC lien may be placed on the equipment. If you are purchasing a business, it is important to ask the business owner if there are any outstanding debts and if lenders have any UCC liens on property. Additionally, it is imperative to obtain a UCC and judgment search on the business and the assets you are purchasing. You can perform research or have a business lawyer conduct research to determine if a business’s property has UCC liens.
Another type of lien is a tax lien. If the business has not paid its taxes, the IRS could put a lien on the business. If you buy the business, you could find yourself having to pay off the business’s taxes before the lien can be dissolved. The government could put a lien on the business’s property and on any future assets the business acquires. If you buy a business with a tax lien, you could find yourself responsible for paying these taxes, or selling business assets to satisfy the business’s tax debt.
If a debtor or other party gets a judgement against a business, a lien could be placed on the business’s property or real estate until the judgement is paid. Searching county records for judgements can help prospective business purchasers understand whether there might be liens on property owned by the business. These are some of the ways a lien can impact the value of a business you might be considering purchasing. Liens can impact the value of a business, because a creditor or the government could potentially force a sale of property to satisfy a debt. Before buying a business, it is important to understand what kinds of debts the business has and what kind of liens the business might have on its property. Legal Counsel, PA is a business law firm that can assist you with this due diligence and research.
What Do I Need to Know Before Buying a Business in Orlando, Florida
There are many things you’ll need to consider before buying a business in Orlando, Florida. Understanding whether a business’s assets have liens is just one form of due diligence you should perform before purchasing a business. Have questions about what you’ll need to know before purchasing a business in Orlando, Florida? Legal Counsel, PA is a real estate law firm in Orlando, Florida that may be able to help you. Contact our lawyers today to learn more. Have questions? We have answers. Contact Legal Counsel, P.A. today at 407-982-4321.
