Am I Liable For The Debts Of My Husband's Business? Thomas Pedreira
Q.
My husband has started a building business with his father. I'm not as much of a financial risk taker as he is. I want to make sure that if something happens to my husband and his father, that I will not be financially responsible for their business choices. Please let me know if I would owe any monies they owe from the business, and if our personal home and savings accounts would be in jeopardy.
-- Anonymous
A.
Depending on the circumstances and the laws of the state where you live, you could certainly be held liable for debts or liabilities of your husband's business. However, there are a number of things that could be done to reduce the risks of personal liability exposure. These would include making sure that the business is organized as a corporation or a limited liability company, that it is adequately capitalized, that proper formalities are followed, that you are not named as a director, officer, agent or employee of the business, that you do not co-sign on any business contracts, loans or other obligations, that the business is adequately insured, and that you keep your personal assets to the extent possible in your own name rather than in joint accounts. Even then, if you live in a community property state, it is possible that creditors could get to any property you hold as community property with your husband for debts or liabilities imposed on him personally in connection with the business.
You should insist that your husband work through an attorney to see that these concerns are addressed. If they are, you may very well conclude that the risks are manageable.
