Full Video Transcript
Liability for a debt or other claim is sometimes limited under the law. For instance, owners of an incorporated business or limited liability company enjoy limited liability under the law for the debts of the business and other claims. Generally, these business owners, or shareholders of a corporation, are only liable to the extent of their investment in the business. This means that if the business fails, creditors cannot seize or sell an owner's home, car, or other personal assets. That said, this limited liability protection is often waived by small business owners through contracts. Banks and other creditors often require the owner to sign a personal guarantee of the business debt. Also, if owners personally participate in wrongdoing, then their personal assets may be at stake.
That said, business owners can do a lot to avoid, or minimize, their personal liability. Proper formation of the business is the first, and one of the best steps you can take. Thereafter, contracts should be signed on behalf of the business only where possible, and any personal guarantee should be reviewed by your attorney. For more information about personal liability, contact an attorney in your area today.