In this episode of Coffee with Carl, attorney Carl Zoellner explains the two main types of liability and how your assets could be affected.


Updated September 21, 2021

Liability: no one wants it, but it’s everywhere. There are two broad types of liability to consider: inside and outside.

With LLCs, you create what I call a “bulletproof box.” This box protects what’s inside from what’s outside and vice versa.

Outside liability is whatever happens outside the LLC. As an example, consider car accidents. Let’s say you get into a car accident and the other person decides to sue you. Without an LLC (your “bulletproof box”) surrounding your business assets, all of your business assets are at risk. In some states, even your interest in your business is at stake.

Inside liability is the risk that comes from whatever happens inside the LLC. With inside liability, the concern is protecting everything else from what happens inside the LLC. For instance, if a tenant on your rental property sues you and the property is not held within an LLC, all of your assets outside the LLC (personal assets included) are at risk.

Creating business entity structures (including LLCs) is important for asset protection because they protect you from both inside and outside liability. When you set up an LLC, what’s inside is protected from what’s outside and vice versa.

Watch as Carl covers the differences between inside and outside liability and how these types of liability relate to your overall asset protection plan.

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