Prevent the liability of your business activity from affecting your personal assets. At Law In Cabo we know that being an administrator or manager of a company is a task that requires knowing the risks to which you are exposed, including the possibility of losing your personal assets. There are three types of liability: for damages, for corporate debts or for tax debts.
How to protect your personal assets when you have a business
Liability for Damages
The first group includes damages to the company, its partners or third parties, caused in the scope of the management of the company and whose origin is in acts or omissions of the administrator, whether negligent, due to lack of diligence or illicit. If the administrator’s fault is proven, he/she will be personally liable with his/her assets.
Liability for Corporate Debts
You will incur liability for corporate debts in the event of not adapting the company to the legislation that regulates it or for not dissolving it when there are legal or statutory reasons. If this happens, you will be jointly and severally liable with the company and it is not necessary to prove your fault.
Liability for Tax Debts
The last group is formed by the liability for tax debts contracted with the administration: penalties or debts. You will be jointly and severally liable for their payment and without the need for the company’s insolvency to be declared beforehand.
How to protect your personal assets when you have a business
How to protect the assets of the administrators?
If you can afford it, it is better to incorporate your business as a limited liability company. That is, your financial liability is reduced to the capital and assets of the company. If your business goes wrong, they will be able to take away what is registered in the name of the company, but not yours (as long as it is not proven that there is negligence on the part of the administrator, in which case he will respond with his personal patrimony).
Separation / donation of assets
If you are married and you are engaged in a professional or business activity, we recommend you to process the separation of assets. This way your personal assets will be safe from the good or bad management of the business activity, whether you are an individual or a company, because if it is in favor of your spouse and children, your creditors will not be able to go against your personal assets to collect the debts that the company may have left them pending payment.
Another advice is to be the holder of those assets strictly necessary (account of the activity, pension plan, IT self-employed insurance and little more) since the consequence of everything being in your name, or in the name of your Administrator, is that in case of problems you will have to respond with your personal patrimony.
Taking out Errors & Omissions Liability Insurance
In case of working as a director or manager, our personal assets are closely linked to the business activity because we respond with all our assets. Therefore, if you hold these positions of responsibility, it would be important to take out Civil Liability insurance to protect our mistakes or those of our employees. In addition to this, it is convenient to have other insurances linked to the activity such as: business premises insurance, collective agreement insurance for workers, Temporary Disability insurance for self-employed…
How to protect your personal assets when you have a business
On the other hand, adapting your company to the requirements of the legislation on the protection of personal data is not enough. The damages caused by the inadequate use of this treatment or custody can make you incur in liability towards the injured parties, as well as in the payment of sanctions imposed by the INAI.
If your business activity requires the processing and custody of personal data, whether of employees, customers or third parties, it is advisable to take out data protection insurance.
Make each company independent
Try that each company, according to the business activity that it develops, is individualized with respect to the others. This will help to limit the liability to the company that acts in the mercantile traffic without dragging down the others. If we do not do so, the parent company and even the Administrator of the company will always be liable if it has not acted diligently, which may lead to having to pay with our personal assets.
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How to protect your personal assets when you have a business
At Cabo Lawyers we seek to satisfy the different legal needs of our clients, both in their business and personal matters. Contact us at: (+52)8119384461, where we will gladly advise you.
You may be interested in: https://lawincabo.com/i-need-a-lawyer-for-my-company
