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Can Liens Be Placed on a Business?

stack of coins and house with gavel, can creditors place a lien on a business, business liens

People start businesses with the hope of success. They want the world to recognize their financial acuity and entrepreneurial prowess.

Even with those hopes, bad deals and terrible decisions happen and things go south. These sometimes result in business liens.

A lien on your business may not be the end of the world, but it’s harmful to the financial success of it. Having a lien puts an ill-favored blot on your business’s credit. Depending on the size of the lien and how your business is set up, it affects you personally as well.

Onlookers in the business world often compare liens to bankruptcy. The monetary loss resembles one.

If you’re wondering how can liens get placed on businesses, we have the answer. Find out here in this straightforward guide.

What Are Business Liens? 

When you fail to pay financial obligations to creditors or the government, they penalize you with a lien. A lien happens when the IRS or a creditor puts a legal claim against your property or business assets.

That property includes business real estate, financial assets, and property attained. Creditors or the IRS have a rightful interest in it and can legally protect their interests with a lien.

How Does a Lien Get Placed on Your Business?

When you own a business, you have an obligation to pay taxes and your creditors. States have different laws and protocols when it comes to liens but the general process is the same. 

If your business fails to pay a debt, a creditor has a right to file a lien against it. They seek the court system’s help to secure the lien until you pay the debt. The same is true for failing to business taxes to the Internal Revenue Service, except on a federal level.  

Types of Liens 

Liens differ depending on the type of debt you owe. You need to understand the difference to compensate your creditors and relieve your business of the lien. 

Federal Tax Lien

The IRS sends a reminder and a demand for payment. Your accounting department for some reason neglects to pay it.

The IRS rebuts your neglect with a tax lien. They file what’s called a Notice of Federal Tax Lien. This is a public filing that alerts any creditors you have that the IRS has taken a legal interest in your property.


When a business fails to pay its debt to a creditor, they seek the court’s help for a judgment. A judgment is when the local court grants a creditor the right to place a judgment lien against your property. 

That lien acts as surety for the debt the business owes. 

Keep in mind that a disgruntled customer may also sue and have a lien placed against the business. This happens as a result of the business’s careless practices toward a customer. 

Contractual Liens 

Contractual liens are often referred to as security interest liens. In most cases, these types of liens are voluntary.

In exchange for a loan, the business grants a creditor security interest in its real estate. If the business defaults on the loan, the creditor has the right to take possession of the property.  

Mechanic’s (Contractor) Lien

Businesses often expand their real estate by making additions to the property. When a business fails to pay the contractor for the mechanical work, the contractor files a mechanic’s lien.

A mechanic’s lien halts all sales and refinance attempts on the property. In some cases, a contractor may auction off the property for payment of the debt. 

Again, state laws vary concerning lien procedures. Be mindful of that if your business faces one.

Stay Ahead of the Complications Caused by Liens

Your ultimate goal should always be to pay your business’s debts right away. Staying on top of your bookkeeping keeps the liens away and the creditors at bay. 

We’d like to offer you some more guidance. Let us handle the legal side of your business needs.

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