If I’m buying into a business, what protections do I need to keep my personal assets safe?

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If I’m buying into a business, what protections do I need to keep my personal assets safe?

Asked on June 8, 2015 under Business Law, Washington

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

If you are buying into an LLC or corporation, as long as the LLC or corporation is a "real" one (i.e. not a sham, not one where business assets are co-mingled with your personal assets, etc.), you are shielded from liability for business debts or judgements against the business by the business structure. (You can still be sued for certain things if you personally commit wrongs in the course of owning, managing, etc. the business, but then the suit is based on your personal acts, not your status as an owner.) The key here would be to not personally guaranty anything, since if you agree to a personal guaranty, then you are personally responsible for those amounts--i.e. they can reach your personal assets.

If it is not an LLC or corporation but rather will be a partnership, then generally, as partner, you could be personally liable for business debts or judgments against the business. The best ways to protect yourself would be 1) to make sure the business has adequate insurance (which would also be a good idea if the businss were an LLC or corporation); and 2) to have an agreement with the business under which it will indemnify (pay) for your legal defense or any amounts you are found to owe due to the business.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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