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Business Formation and Understanding Liability Inside-Out and Outside-In

December 30th, 2013

Posted in Asset Protection,Business Law

If you own a business in Florida, you should make sure your personal assets are protected from your business liability and your business assets are protected from personal liability.  This level of planning is often referred to as Inside-Out vs. Outside-In asset protection.  Inside-Out liability refers to when a business owner can have his or her personal assets attacked based on a business lawsuit.  This is one of the primary reasons that someone forms a business entity – to protect one’s personal assets from business liability.  It is important how a business entity is structured to achieve the best asset protection in this regard.

Moreover, one of the most overlooked considerations when forming a business entity is Outside-In liability.  Outside-In liability deals with business assets that are attacked due to the liability of a business owner that occurred outside of business dealings.  For example, if a business owner is sued personally unrelated to the business and damages are awarded, the injured parties can come after the owner’s stake in the business and the assets of the business for payment.  It is just as important to take this concern of Outside-In liability into account when forming a business in Florida.  Engaging a qualified attorney is always recommended.

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