Liability Concerns for Business Owners
Business owners must be careful that their assets are protected. Unfortunately, a business or its owner can often be perceived as easy targets for lawsuits seeking to empty a “deep pocket”, and enrich the plaintiff. Fortunately, SSHK can help with asset protection for businesses and help mitigate liability for yourself and your business.
Our business attorneys can teach you strategies to minimize risk to the business assets as well as your personal assets, and we can provide legal representation in the event that litigation is threatened or brought.
Choose the Right Type of Business Entity
There are various structures to choose from when starting a business, and the way you structure your business can protect your personal assets from being compromised in a legal settlement. Liability reduction in a scenario where the owner and the business are not separate legal entities is a significant challenge, and not always practicable. It is better to start with a business structure that protects your personal assets from corporate liability by separating them from the assets used and owned by the business.
If you fail to do so, you may be unnecessarily exposing yourself or the business to potential liability. This means that assets like your home, your vehicle, or retirement funds may be subject to the claims of any business creditors you may have, which include any legal judgments made against your business.
The reverse is also true. If you experience personal legal trouble, you want the tools, equipment, and other assets specific to your business to be protected, and not subject to being garnished or seized based on the personal judgment. You can maintain separation of your personal assets and your business assets in a few ways, including by forming a corporation or limited liability company, and carefully avoiding any commingling of your personal assets with those of the business.
In the event that the business owns valuable property necessary for doing business—such as the real estate where the business is located—it is usually advisable to create separate holding companies, from which the business can lease that property for its use.
Establishing this kind of business makes your company a unique legal entity, completely separate from (but still owned by) you as an individual. As a general rule, if your business ever faces legal action, all assets in your personal name have substantially more protection from lawsuits against the company as long as the business is managed properly. Unfortunately, exceptions are possible, so it is important to have trusted legal counsel available to help you avoid personal liability..
It is crucial that, once you have established a business that is legally unique from you personally, you must treat that business as independent of your personal finances and resources. This will minimize the risk of losing the protective advantages of the business entity, and becoming personally liable for your business’ debts and other liabilities.
Asset Protection for Businesses in Utah
For more information about asset protection for businesses, contact Stevenson Smith Hood Knudson, P.C. today. We are here to help.