Potential Creditors

Creditors are usually characterized as Inside Creditors or Outside Creditors

Inside Creditors:  These are creditors whose claim is directed against the business operation or real estate directly.  Generally the creditor is limited to remedies against the assets within or inside the entity itself.

Example:  a person slips and falls or suffers from respiratory illness stemming from harmful mold related to water damage at an apartment house owned by an LLC.  Such as person only has the right to assert the claim against the LLC itself.  The manager and members of the LLC have no personal liability to the inside creditor.

First line of defense: Most businesses and real estate operations have liability insurance to protect against inside creditors.   However, there is always the danger that the claim is outside of the scope of the insurance policy or that it may exceed the policy limits.

Outside Creditors:  These are creditors whose claims arise outside of the purview of the business entity or real estate operation and are generally asserted against the business or real estate owner personally. 

Often these are claims against individuals such as auto accident claims in excess of policy limits, other tort liability beyond the scope of personal or liability umbrella insurance.  Such claims may also stem from contract claims for personal loans, guarantees and other contractual obligations

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