Closing a business, what kind of liability will we have with customers?

Asked over 4 years ago - Rochester, NY

My husband and I took over a family business and signed an agreement that we would pay his mother a monthly payment with 9% interest for 3 years to pay her back for the business and if we do not pay, she takes the business back over. The business does not bring in enough income for us to pay our business and personal bills so we told her that we would only be able to pay her 1 more month. She has decided to close the business after that payment. Who is liable for the customers refunds? Who is legally going to be blamed for closing the business on its customers?

Attorney answers (2)

  1. Matthew James Walters

    Contributor Level 10

    Answered . Was this business a sole proprietorship or a corporation? In the latter case, typically, no one is personally liable for customer refunds.


    Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship. You are strongly advised to contact an attorney to obtain legal advice before taking or refraining from taking any action with respect to the above.

    Matthew J. Walters
    Law Offices of Gerard A. Walters
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  2. Nicholas Donovan Heimlich

    Contributor Level 12

    Answered . An answer to this question depends on the contracts involved (both between your husband and her mother) and with the customers. On a non-legal note, you also want to consider that this is his mother and take that into consideration when deciding what to do. Usually, when a business closes it must follow legal procedures to give notice to customers, or refunds and to resolve any debts. Most states may also require (if there was a Corp. or LLC) that the company dissolve with the state authority or it may keep getting charged for state corporate taxes. You should consult an accountant as to tax filing requirements.

    Please note that this answer is not legal advice, and should not be relied upon. Each state has different state laws and procedures. A review of all documents and a consultation at a minimum is necessary to render effective legal advice. This answer does not create an attorney client relationship. Consult an attorney before you decide on a course of action.

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