How do I ensure proper liability protection?

Succesful merchants whose businesses have never found themselves in any serious legal trouble may assume that their assets are safe in the event of a personal lawsuit. However, these are the same people who should take steps to protect themselves.

Writing for Entreprenuer Magazine, Mark Kohler cites the example of a client who was at fault in a recent car accident. The driver and passengers in the other car were severely injured, making a lawsuit likely. But, Kohler wrote, the client did not think his business assets could be threatened.

The client was wrong. To warn others against making the same mistake, Kohler listed three tips for those who wish to protect their businesses from what he calls "outside liability."

First, Kohler advises business owners to create a list of all their companys' assets. The list should include their fair market value and any debts.

"This is important in order to evaluate what equity in various assets are exposed," he added.

Second, Kohler wrote that owners should what, if any, protection their state laws offer. For example, 13 states allow owners to protect assets inside an LLC.

Finally, Kohler suggested looking into umbrella insurance, which would protect business assets from personal lawsuits resulting from accidents. Kohler pointed out that such insurance does not usually apply to negligence, fraud or criminal action.

Issues of corporate liability protection can doom a successful business in ways that have nothing to do with revenues or expenses. Merchants should consult with a Phoenix small business attorney to discuss the ways they may be able to protect what they have built.

Categorised in: Asset & Liability Protection

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