Business Personal Liability Exposure Risk

1513 WordsFeb 27, 20167 Pages
Introduction The running and operation of businesses poses the risks of loss and liability in the case of tort negligence or breach of contract. However, the business legal structure of a given organization greatly determines the risk of exposure to personal liability (Bevans, 2006). The paper investigates and compares the risk of exposure to personal liability in five business entities and explores how the risk can be mitigated. Business personal liability risk is classified as limited and unlimited. In unlimited liability, the personal assets in addition to business assets can be seized (Hillman & Loewenstein, 2015). Limited liability as seen in limited partnerships, corporations and limited liability companies significantly reduce the risk of exposure to personal liability. Opening a limited partnership in addition to taking insurance to protect the business offers the best chance of averting the risk for personal liability risk (Schich, 2009). Table 1: Business Matrix Personal Liability Exposure risk (Compiled from Hillman & Loewenstein, 2015) Business Personal Liability Exposure Tinker’s Home Security Service (sole proprietorship) High –exposure risk. The owner bears all the liability and losses incurred. Tinker’s Home Security Service (general partnership) High exposure risk of personal liability. However, the risk is shared among the partners. Tinker’s Home Security Service (LP) A limited partnership business has limited liability of the partners to the extent of
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