As a business owner, you may have protected your assets from liabilities by setting up a business entity such as a corporation or limited liability company. But have you protected your personal assets against other liabilities?
Business owners have legal risks from business creditors. Risks include a customer who slips and falls on the owner’s property, defective products, providing negligent advice, employee lawsuits, and many more.
There are also legal risks to business owners that expose their personal assets. These risks include a business owner’s negligence, failure to pay certain taxes, environmental liability, default under personal guaranty to a bank, liability arising at home, and others.
A corporation or LLC does not protect against these risks.
There are ways for a business owner to protect his or her personal assets from these types of liabilities. This planning can be as simple as the way assets (such as a home) are owned. Or it can involve setting up a particular type of trust or business entity that has liability protection.
It is important that this planning be done well in advance of when the liability is incurred. If it’s not, the law will not recognize the protection and the business owner’s personal assets will be exposed.