Your current business structure might leave you personally liable to creditors
Many small business owners go into business for themselves without thinking about their personal liability if the business is sued by creditors. Many owners believe that their personal assets and their business assets are separate. They may have different bank accounts for their personal and business assets, and they may have an accountant who only manages their business assets. The biggest problem with this thinking comes when the business owner becomes liable to creditors or is sued. If a business owner has never done any filings to change their business structure, they are probably considered a sole proprietorship and, as such, their personal and business assets are the same. If you don’t know what your business structure is, there is a good chance you run a sole proprietorship. In fact, over 2/3 of businesses in the United States are sole proprietorships.
For liability purposes, having a sole proprietorship means that a creditor or someone with a legal suit can go after the business owner’s personal assets as well as their business assets (as limited by other regulations such as debtor/creditor rules and bankruptcy law). Business owners who wish to protect their personal assets should consider going through the process of filing to become a Limited Liability Company (LLC) or other entity with limited liability. There are several options and an attorney will need to know the specifics of your business to know which is right for you. The filing process is relatively simple and affordable, and your attorney can walk you through the process.
You should consider restructuring to avoid personal liability
If you are already facing claims against your personal and/ or business assets, you need to contact an attorney to discuss your options. Your attorney can also help explain your liability given the type of lawsuit and your business structure. However, it is always best to try and reduce your liability before something goes wrong. Consult an attorney to discuss whether restructuring your small business is something that would benefit you.
Joyce Law Firm was founded in 2002 by Kirk Joyce. Each of the attorneys at the Joyce Law Firm focus in specific areas of law, including, but not limited to: personal injury, immigration, criminal defense, family law, and business law. Contact the Joyce Law Firm today at 479-442-5577. More about Joyce Law Firm