What Is a Business Liability?

This business finance key term is a legal obligation to repay or otherwise settle a debt. Liabilities are considered either current (payable within one year or less) or long-term (payable after one year) and are listed on a business’s balance sheet. A business’s accounts payable, wages, taxes, and accrued expenses are all considered liabilities.

Liabilities are legal responsibilities or obligations.

Many of these small-business liabilities are not necessarily bad but to be expected. In an accounting sense, some liability is needed for a business to succeed. Loans, mortgages, or other amounts owed can be liabilities. A business definition of “liable” in the real world, though, tends to have a negative connotation. That’s because liability tends to correlate with litigation, which can be costly and alarming. Loans, mortgages, or other amounts owed can be liabilities. When a business owner hears the word “liable,” they tend to panic. These tend to be unpredictable and varied and are very different from financial, necessary liabilities.

Accounting standards define an asset as something your company owns that can provide future economic benefits. Cash, inventory, accounts receivable, land, buildings, equipment – these are all assets. Liabilities are your company’s obligations – either money that must be paid or services that must be performed

A business owner needs to remember that just because someone is suing doesn’t necessarily mean they have a real case. Liability doesn’t always lead to litigation, and litigation doesn’t always happen because of your liability. Sometimes, lawsuits are simply unavoidable. If you run into legal trouble, trust an experienced lawyer. Do not hesitate to contact the attorneys at Tishkoff if you have questions regarding litigation, or business or employment law.