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Pillars of Strength: Three tips for protecting your personal assets when forming and operating a company

May 23, 2014

When clients approach us for business formation, one of their concerns is protecting their personal assets from a business misfortune, either simple financial failure or a catastrophic situation creating an unexpected liability.

We tell clients, first, that no undertaking is made without some degree of risk.  In shorthand, we say “if you want to avoid all potential liability, don’t get out of bed in the morning.”

But with that as background, it is possible to carefully limit  the exposure one is undertaking with full consideration given to three essential layers of protection:

  1. Engage in good practices.  Despite popular lore, most legal liability arises from either from contractual undertakings — i.e., voluntarily entering into an oral or written agreement — or negligence, i.e, failing to follow the expected standard of care in some function, whether driving a car or manufacturing a product.  As to contracts, be careful what you agree to.  As to negligence claims, if your touchstone is proper hiring, proper training, proper operation and proper supervision, and that you maintain your equipment and real estate in good condition and repair, your risks should be minimal.
  2. Buy appropriate insurance.  Then, consult with your insurance agent and purchase insurance appropriate to insure the risks that you undertake and that are inherent in your operations.
  3. Properly operate under a corporate entity.  Finally, a corporate form, properly created and respected, shields your personal assets from contractual and tort claims.  Read more here about respecting the corporate entity.

Read below two related topics:


Please contact us to learn more about how to protect your assets when forming and operating a business.