Are You at Personal Risk if Your Business is Sued?
The risks of being a small business owner are often thought of in terms of the business itself, but what about the personal risks? If your business is sued, are you at risk of losing your personal assets?
It is a question that many small business owners do not think about until it is too late. The short answer to this question is yes, you are potentially at risk of losing your personal assets if your business is sued. Depending on how your business is structured, a lawsuit could put your personal assets in jeopardy if the creditor goes after them to satisfy the debt or judgment.
The Business Structure Determines Personal Liability
The structure of your business – whether it is a sole proprietorship, partnership, limited liability company (LLC), or corporation – will determine the extent to which you are personally liable if your business is sued.
If you own a sole proprietorship or general partnership, then you and any other owners are personally responsible for the debts and liabilities of the business. Creditors can pursue you personally for payment, meaning that any personal assets, such as a house or savings account, could be at risk.
If your business is structured as an LLC or a corporation, then you would generally not be held personally liable for business debts and claims against it. However, there can be exceptions. It is possible that you could still be held personally liable if your business was found to have acted negligently or fraudulently.
Protecting Your Personal Assets
The best way to protect yourself from personal liability if your business is sued is to make sure that you have a separate entity structure and that it is properly maintained.
This means setting up the business as an LLC or corporation, obtaining appropriate insurance coverage, keeping accurate financial records, and following all laws and regulations associated with running a business in Illinois. Additionally, it is important to be aware of any contracts or agreements that could expose you to personal liability.
Call Us for Help
The Naperville business law attorneys at the Gierach Law Firm can help you choose a business structure that meets your needs while reducing personal liability as much as possible. We can also help you understand your legal rights and responsibilities if your business is currently at risk of being sued. We provide experienced and knowledgeable representation for all types of businesses throughout the greater Chicago area. Call us today at 630-756-1160 for a confidential consultation.
Please note: These blogs have been created over a period of time and laws and information can change. For the most current information on a topic you are interested in please seek proper legal counsel.