If your California business is named in a lawsuit, your personal assets could be at stake depending on how it is organized. Assets might also be at risk if you are sued by a creditor for any reason. However, there are actions that you can take to potentially shield a car, home or other items from being seized.
Put items in a trust
Placing assets in a trust removes them from your estate, which means that they are shielded from creditor claims. Of course, this depends on whether or not the trust was created in good faith. For instance, if you created the trust a day before you failed to make a car or house payment, a judge might invalidate the trust. If it was created a week or two before you failed to make payments on a business loan, assets in the trust may be used to pay off a business litigation judgment.
An insurance policy will pay some or all of any judgment rendered against your business. This will enable you to keep your assets or to retain control of whatever items you value the most. Alternatively, you may ask employees to buy insurance that kicks in when they operate a company vehicle or other items that may cause property damage or bodily injury.
Protecting assets from lawsuits is one of many goals that you’ll have when creating an estate or business plan. In addition to using a trust or buying insurance, you may also wish to create a buy/sell agreement or structure your business as a corporation to limit your personal liability.