Ask a Lawyer - Archive

My father and I started a salon using equity loans taken out on our homes. There is about $40,000 in equipment. Can either one of us place a lien on the equipment for this amount?

A first consideration is whether or not the business is run through a separate entity (e.g., an LLC or a corporation). If so, the owners could certainly put liens on the business assets for funds they may have loaned or advanced to the business entity. But there are things to consider in terms of whether or not the liens are enforceable. For example, are there any other creditors who have a prior lien on the same assets? If so, the owners' liens would be junior to those liens. Is the business solvent? If not, the liens may not be enforceable. Have the liens been perfected? If not, other creditors may get ahead of your liens. Do you have a loan agreement, a promissory note, a security agreement and a UCC-1 on file? Go see a lawyer about this to make sure you can lien the assets and perfect your security interest.