Good afternoon David, Thanks for asking for me, In answer to your two questions, 1. You must demand that your wife have business liability insurance as well as an umbrella policy. The minimum coverage will be One Million Dollars. 2. While your retirement vehicles such as the 401K and IRA's are exempt from general creditor claims---such as personal injury judgments, your personal assets are not. So, until your wife makes the step to taking the thing to the non-profit status---which will be through a corporation, she should consider dropping the entire venture into an LLC---immediately. Until she does that, the two of you cannot protect your personal assets. It is really quite that simple. Any business---no matter how low a liability risk it may appear, has the potential to suffer a 7 figure liability judgment, overnight. To ignore that possibility would be somewhat overconfident. You may reply back to me using the Continue the Conversation or Reply to Expert link if you need any clarification of my answer; and if you do, I ask that you please keep in mind that I do not know what you may already know or with what you need help, unless you share that with me. Please remember to rate my service to you when our communication is completed, so that I will be compensated for my time in providing you with the information you requested. I will be happy to continue further, and to assist you until I am able to address your concerns, to your satisfaction. I wish you the best in 2013, Doug
I have seen just yesterday that he has taken at least a very minor step toward looking for an insurance company. But I will have to see how much focus she puts on it.
A few follow on questions...
I have no concern for the business. If the business gets sued and they go bankrupt that is fine. It is a tiny venture anyway. So to clarify, if and when they become a non-profit, at that point would my personal assets be exempt from any legal action against the company?
Same for an LLC. If they did that instead, our personal assets would be exempt as well, right?
In either case, once they become a non-profit or LLC, any liability insurance at that point would be to protect the business, and less about protecting our personal assets. Is that about right?
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).