fbpx
8833 South Redwood Road
Suite C
West Jordan, UT 84088

Call For Free Consultation

(801) 676-5506


Call Us

Limit Your Exposure in Business Lawsuits

In the law, you learn things in school, but you also learn things over time – you know, hard knocks and further research. As Business Lawyers, we discovered long ago that there are things that you can do right now to prevent future problems.

These are the things every business owner (big or small) should know about protecting personal assets from lawsuits, creditors and business liability. Being self-employed and owning your own business comes with inherent risk. Even big businesses land in financial trouble and sometimes fail. So, here we discuss how to limit your personal exposure to a business lawsuit. We also discuss how a corporation can protect you from a business lawsuit. A sole proprietorship or general partnership do not offer protection.

Limit Your Exposure in Business Lawsuits

Most of the time small business owners keep busy with work, life, family. They generally have just enough time to keep it all together. Many never fully understanding the potential liability they expose their assets to in a business day. Moreover, many are unaware of how asset protection plans can limit that risk.

Planning for Entrepreneurs

Small business owners need to be especially prudent about protecting themselves against liability both from the business and daily life in today’s litigious society. Plus, it is important to protect your business assets from a personal or business lawsuit. Small business owners with less than $1 million of business revenue and a net worth of $500,000 can create simple asset protection plans quickly and easily. They can accomplish this and from anywhere between $2,500 and $20,000.

On the other hand, according to workforce.com, the average cost of an employment lawsuit is $75,000 to $125,000; escalating from $175,000 to $250,000 for a jury trial. Those with asset protection strategies in place have effectively removed the pot of gold from the end of the rainbow. Therefore, notifying your opponent of such, you increase the likelihood of hearing “case dismissed” or reaching a quick settlement. Thus, the sooner you start asset protection planning the stronger it is and less expensive it will be to defend yourself in the event of a lawsuit.

How to Limit Personal Exposure to Business Lawsuits

Here are some things you can to do limit your liability.

Incorporate Your Business

Most business owners are aware of the limited liability they can enjoy when they incorporate or form an LLC. However to maximize asset protection a few points they should scrutinize. Form your business, fund it, operate it and maintain it with asset protection in mind. This is your first layer in limiting personal exposure to your business.

Inventory Your assets

Regularly inventory your debts and assets, including second homes, investments, retirement accounts, corporate stock, etc. These are important assets that a creditor can take away during litigation.

Know Your Exemptions

You may have protected some of your assets from creditors in holdings such as your primary residence (in some states), retirement account, pension or life insurance. When state or federal laws provide sufficient protection from creditors your asset protection plan should focus on fraud claims, divorce and tort liability (negligence).

Do Not Personally Guarantee

Do not personally guarantee business contracts and loans – By signing a personal guarantee you essentially disregard the limited liability of your corporate entity. In the event of failure to pay or perform on a contract, you are on the hook. Find a financial institution or vendor who does not require a personal guarantee in order to work with you. If you must guarantee a business agreement then apply limitations for a specific time. Alternatively, you can pre-determine an asset in the contract that they can use as collateral.

Sign as a Corporate Executive 

Sign contracts, John Smith, President of ABC Corp. not John Smith. Even if you have a corporation, if you execute a contract personally, the law will likely consider it a personal guarantee. When executing contracts always ensure you are acting on behalf of the business. You can also limit contract liability with verbiage in the agreement that caps or disallows specific damages.

Realize Insurance is Limited

Yes, this is a line of defense for liability, business, property, automotive, etc. The problem is that the coverage is limited. That is, someone can always sue you for more. Plus, insurance companies write a broad range of exceptions in their policies so that they can squirm out of paying when you need it the most. For example, most policies do not cover sexual harassment or fraud, whether you are falsely accused or not.

Free Consultation with an Asset Protection Lawyer

When you need legal help, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


Recent Posts

Irrevocable vs. Revocable Trusts

Bankrupt Medical Bills

Which Asset Protection Tool is Best?

Debt Relief

DUI Consequences

Trade Secrets

Share this Article

Michael Anderson

About the Author

People who want a lot of Bull go to a Butcher. People who want results navigating a complex legal field go to a Lawyer that they can trust. That’s where I come in. I am Michael Anderson, an Attorney in the Salt Lake area focusing on the needs of the Average Joe wanting a better life for him and his family. I’m the Lawyer you can trust. I grew up in Utah and love it here. I am a Father to three, a Husband to one, and an Entrepreneur. I understand the feelings of joy each of those roles bring, and I understand the feeling of disappointment, fear, and regret when things go wrong. I attended the University of Utah where I received a B.A. degree in 2010 and a J.D. in 2014. I have focused my practice in Wills, Trusts, Real Estate, and Business Law. I love the thrill of helping clients secure their future, leaving a real legacy to their children. Unfortunately when problems arise with families. I also practice Family Law, with a focus on keeping relationships between the soon to be Ex’s civil for the benefit of their children and allowing both to walk away quickly with their heads held high. Before you worry too much about losing everything that you have worked for, before you permit yourself to be bullied by your soon to be ex, before you shed one more tear in silence, call me. I’m the Lawyer you can trust.