Closing A Business: Long-term Contingent Liabilities
Contingent liabilities are potential liabilities that could arise in the future when some event happens like the breach of a lease.
No business owner will leave the assets of a business in place for 40 years to see if a contingent claim is made on a long-term lease. Even if the entity is still in place, a claimant with a now-former contingent liability may still have a claim to the distributions made out of the business, but if the entity is in place, at least there is something to discuss. In a situation like this, the owner must consult with an attorney about the specific facts. But while the owner is thinking about how to handle the situation, the key is to leave the entity in place at least until you have some kind of a plan or direction with respect to the contingent liability.
A consultation with a knowledgeable attorney is comparatively inexpensive to the problems and costs that can arise as a result of winding down a business without thought or planning. We strongly recommend bringing in an attorney to understand the potential pitfalls when closing a business.
This article does not cover situations that require more legal process and attorney involvement, all of which will be the subject of future articles. They are filing a bankruptcy, placing the business into receivership, making strategic partial distributions or pro-rata partial distributions to creditors and settling obligations with creditors for less than the full amount owed.
Contact the bankruptcy attorneys at Wenokur Riordan PLLC today at (206) 724-0846 to discuss your situation.