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LawTalk, Attorney and Counselor at Law
Category: Family Law
Satisfied Customers: 37818
Experience:  30 years legal experience. I remain current in Family Law through regular continuing education.
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My wife has a small business that she is eventually turning

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My wife has a small business that she is eventually turning into a non-profit. That will take a bit more time. It is a kids performance theater group. She has actors that she pays, the rehearse (at various locations, houses) and they perform in a church space that they pay for hourly and are asked to perform other places like libraries, pre-schools, etc.

I am concerned about liability and protecting our personal assets if something should happen and a parent wants to sue her personally or the business - say for instance a kid falls or trips while watching the show. People coming to the show pay $ to see the show.

2 questions really.

A) Her business should get some kind of liability insurance, yes?
B) My wife is reluctant to do the paperwork and pay the $ in order to get liability insurance. In this case she is putting mine and her entire financial portfolio at risk. Right? It is a low risk, but a risk. SO - as her husband, short of filling out the paperwork and doing the liability insurance on my own is there anything I can do to protect our assets. I have a 401K, we have retirement IRA savings, etc. Can I somehow dissasociate all my/our assets from her business somehow. What is the best way to do that? The assumption here is that SHE is not going to do anything, it is something I have to figure out and do myself. So one might say - Oh - she should create an LLC. I agree, but its something SHE would have to do, not me.

Any thoughts?

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,


Customer: replied 4 years ago.



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?





Until the "business" is either put in a corporation (as non-profit) or an LLC, any judgment against the business would be a personal judgment against your wife.

Once incorporated or an LLC, if the company follows the rules relating to corporations, your personal assets are safe. Until then, you are at risk.
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