Basic Training: Z is for Zapping Yourself by Walking Away
By Nina Kaufman, Esq.OK, so there aren’t many usable “Z” words in this context. 🙂 Today’s Basic Training post revisits that old, old lesson that you can’t just escape or quit your business by walking away.
Q.: What are the ramifications if I walk away from my small business–just turn the keys over to the landlord and walk away? I paid the business loan off with a personal loan. I have equipment at the site but no longer live in the state.
A.: Walking away from your business is like walking away from a dead relative without having a funeral. Someone has to dispose of the body–or, in your case, the equipment you’ve left at the site. Someone has to wrap up estate matters–just as a business should be formally dissolved. Someone has to take the time to handle outstanding debts–just as you now have this loan on your personal books that has to be paid.
There may be outstanding taxes, outstanding invoices, filing fees. If you walk away from the business, depending on your state’s laws, you may still be held personally responsible for these matters, regardless of whether you’re now living in another state. Do you have employees? Any recurring contracts (website hosting, other service providers)? Any other regulations or notifications in connection with your particular industry? You may want to turn the keys over to the landlord, but the landlord may not accept that deal, in which case you’re still on the hook. Also, by not making sure you’ve tied up any possible loose ends, you run the risk of finding yourself embroiled in litigation you didn’t expect–especially if you personally have been hard to reach because you’re out of state.
Closing out a business needn’t be an onerous process–especially if there are few debts or assets involved. But it does take at least some planning and forethought . . . to make sure you don’t get “zapped” by legal surprises.
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