Maintain your liability insurance.
An important reason for creating a business entity is to protect the owner from personal liability for claims arising out of the conduct of the business. Although this works in most instances, one area in which the owner continues to have personal liability is for negligent conduct committed by the owner.
- Example 1: Owner is driving the company car on company business and goes through a red light colliding with another car and injuring the other driver. In this example, the owner, because he is the driver, has personal liability for the injuries to the other driver that have been caused by the owner’s negligent driving; this is so even though the owner is driving the car on company business.
- Example 2: An employee is driving the company car on company business and goes through a red light colliding with another car and injuring the other driver. In this example, the owner has no personal liability for the injuries caused by the negligent driving of his employee, because the employee is acting as an agent of the company and not the owner.
- Be sure to maintain insurance sufficient to insure the owner’s potential liability in circumstances in which the owner’s negligent conduct may cause an injury.
We can help you structure your business entity in a manner that minimizes the circumstances in which the owner may have personal liability arising out of the conduct of the business.