Can you protect your personal assets in a sole proprietorship?
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Can you protect your personal assets in a sole proprietorship?
If an individual did not want to form an LLC, is there a way to protect personal assets as a sole proprietorship?
Asked on December 28, 2011 under Business Law, Minnesota
Answers:
Kenneth Avila / Kenneth Avila, Patent Attorney
Answered 12 years ago | Contributor
I would agree with the prior answer. I would also add that an LLC will not protect you against injuries you cause to others directly. For example lets say that you have an auto repair service and you saw a puddle of oil in an area where customers walk but did not clean it up. A customer who slips and suffers an injury may sue you directly (and likely the LLC as well) and you will not be protected by the LLC. So it is wise to have good personal liability insurance when running a business, LLC or otherwise.
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
There is no way to insulate yor personal assets from liability arising from your business if you are a sole proprietorship; as a sole proprietor, there is no separate business entity, but rather the business and the person are one and the same. Therefore, a claim against the one is a claim against the other.
Having the appropriate insurance (e.g. a good general commercial policy, with liability coverage and also errors and omissions coverage as applicable, plus an umbrella policy on top of that) will, however, provide a substantial amount of protection.
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