Unlimited Risk

Categories: Insurance

You'll have this if you set up your business as a sole proprietorship. Lose a lawsuit running that fruit stand, and not only do you lose your business, but you lose your home, your car, your clothing, that hand-drawn-picture of The Animaniacs, etc.

How do you protect against unlimited risk? Incorporate as an LLC, or Limited Liability Corporation. That way, if you lose the Stooge Lawsuit, you'll still lose the company...but you'll keep your personal assets. And that's a good thing. You don't want to end up living in your Prius down by the river.

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Finance: What is an LLC?4 Views

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finance a la shmoop. what is an LLC? LLC no that's not a rapper, that's a limited

00:10

liability company or look as professionals in the business pronounce

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it. well why do you want one? because limiting your liability is a [man explains]

00:19

good thing if you're the one potentially liable for that stooge who slips on a

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banana peel in your lobby waiting area and then Sue's you and wins. if you start

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building your own company as an individual and not as an LLC and you get

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sued for whatever, and you lose well you could lose everything you own.

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that is the lawyers will come after your house your car your poodle your signed

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Mila Kunis photograph collection, and legally well they'll be entitled to take

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all of it. if you have existed under the legal structure of an LLC however, well [legal structures pictured]

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the most you can be liable for is the assets of the business itself. yes

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they'll take the company computer the remaining 17 months of lease on the

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company building, and all your staplers and posted thingies but legally they

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won't be able to go after your home your car your poodle or your autograph

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collection. Mila is safe whew. so LLC's are a good thing they cost only a few

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hundred bucks to set up these days, hi LegalZoom. so before you start up a lava

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lamp company of your own think about setting up an LLC first. Mila and your [lava lamps in a row]

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poodle gregory will thank you for it.

Find other enlightening terms in Shmoop Finance Genius Bar(f)