Protecting Your Personal Assets

If there is any significant chance your business will ever be sued (or just for your own piece of mind), there are several steps you should take as a business owner to protect your personal assets:

Step 1


Incorporate your business. Doing so limits a lawsuit to the assets of the Corporation. This also applies to any claims your creditors might have in the event of a bankruptcy.

This does NOT apply if it can be proven in court that a director acted in a negligent manner.

Step 2

If your business is capital intensive, incorporate a separate company to hold all the major assets of the business.

Step 3

If your business is made up of more than one distinct business, it may be wise to incorporate separate companies for each business. By doing so, you will not lose both businesses if one business fails.

Step 4

Only one spouse should be active in the business. All family assets including the house, bank accounts, mutual funds, investments, etc. should be transferred into the name of the other spouse.

Should a lawsuit survive the protection generally provided by a corporation, there will be no personal assets in the hands of the spouse active in the business (i.e., the spouse against whom the lawsuit is filed).

NOTE: In the event of a divorce, having all the assets in the name of just one spouse will not change the legal settlement of the divorce. Except where otherwise specified by a prenuptial agreement, all assets acquired after marriage are considered to be owned by both spouses during a divorce proceeding.

Step 5

Transfer all your investments and RRSP's to funds that are administered by life insurance companies. Creditors cannot attach any funds held by life insurance companies. In addition, some life insurance companies will guarantee your capital even if the life insurance company itself goes bankrupt.

There are no guarantees, of course, that your personal assets cannot be attached in a lawsuit, but by following the steps above you can greatly reduce the risk.


Recipient Of
The Oakville Beaver's
Readers' Selection
1st Place Diamond Award
in the category of
Incorporation Services
for ELEVEN YEARS in a row