Legal Question in Business Law in California

No. The legal time limit for filing lawsuits has expired.

Where is the leased equipment now? When did the lease finally expire? There is a statute of limitations for suits to collect for breach of a written contract; in general, it is four years from the date of the breach. Each missed payment would be a separate breach. Therefore, payments due in February, 2007 and earlier are probably uncollectible. At the end of the lease (unless it was a finance lease) you would not be the owner of the equipment, and you'd have had an obligation to return the equipment. This obligation may have a different statute of limitations and/or the four year written contract limit may not have expired. Also, the leasing company may be asserting under an "account stated" or "book account" which could operate to renew the entire obligation, although more likely than not a straight lease of a fixed qualtity of items at a fixed rate would not give rise to either.

I got so tied up in the statute of limitations defense that I failed to discuss another aspect of your potential liability. What you are mainly asking is whether Business Y can be held to answer for the debts of Business X, which is defunct. The very short answer is "maybe."

If both X and Y are/were sole proprietorships, owned and operated by you, that difference is unimportant in the eyes of the law. Your proprietorship businesses are not distinct from you, at least insofar as liability for debts.

If Y, the current business, is incorporated and properly capitalized and managed, it cannot be held liable for debts of X, or of you. (However, YOU are still liable for your debts, unless you have a statute of limitations, or some other, defense.)

If X were incorporated, you might be personally liable for its debts that weren't paid in connection with its closure. The issue of an owning stockholder's personal liability for failure to pay bills when closing down a corporation is moderately complex, but basically if any insider takes anything out of the corporation before all the creditors get paid, the insider is potentially liable to the creditor. Again, subject to defenses such as the statute of limitations.