The Real Risk of Outside Liability: A Cautionary Tale

Let me share a story that illustrates how quickly things can go wrong — and how devastating the consequences of outside liability can be.

A family friend of mine owned a successful fishing charter business. He worked hard to build it up, and it was thriving. One day, he decided to take a few friends out on a leisure fishing trip using his company’s boat. It seemed like a fun, carefree day on the water ??. But the weather turned unexpectedly rough, and the boaters were thrown from the vessel.

Tragically, one of his friends was severely injured by the boat’s propeller and later passed away. The family of the deceased is now pursuing legal action. They want to sue my friend, not just as a business owner but also personally. They could come after both his business and personal assets — his home, savings, and everything he’s worked for — because the lawsuit stems from something that happened outside the scope of his regular business operations.

This is a classic case of outside liability, and it could happen to any of us.

?? What is Outside Liability?

Outside liability refers to risks that arise from personal matters but can threaten your business assets. In the story I just shared, my friend is facing outside liability because the boating incident happened during a personal trip, but the family of the injured person may still try to go after his business due to the use of the company boat.

Examples of outside liability include:

• Personal lawsuits stemming from accidents or injuries (e.g., car accidents, boating accidents).
• Divorce or family disputes that put personal and business assets at risk.
• Personal creditors coming after your business interests if you owe money or default on loans.

?? What’s at Risk in Outside Liability?

The real danger with outside liability is that it can pierce the veil between your personal and business lives. If the proper structures aren’t in place, creditors or plaintiffs could come after:

• Your business bank accounts ??
• Company equipment or property ??
• Revenue streams ??
• Personal assets like your home, car, and retirement savings ??

In the story, my friend’s entire business, and possibly his personal assets, are on the line because he didn’t anticipate this kind of risk.

??? How to Protect Yourself from Outside Liability

No one expects these kinds of events, but they can happen to anyone. Fortunately, there are ways to safeguard your assets from outside threats:

1. Create a Charging Order Protection Entity (COPE):
2. Use Multiple Entities:
3. Insurance:
4. Personal Liability Trusts:
5. Separate Personal and Business Use:

In my friend’s situation, proper planning and protection could have made all the difference. Outside liability is a real threat, especially for business owners and executives. If your personal life suddenly intersects with your business, your entire livelihood could be at stake.

Don’t wait until it’s too late — make sure your assets are protected from both inside and outside liability.

Have questions or need help building a comprehensive protection strategy? Drop a comment or reach out. I’m here to help! ??