Liability Protection


Mar 11

Question: People from foreign countries come to visit US and I need to take care of the tour.

Hi,I live in Madison ,WI….a group of my friends in foreign countries are planning to come visit me in the future and I need to take care for their tour…just wondering what I should do to avoid any risks that are caused by accident ? Should I register a company to protect my personal property and avoid bankrupt? Ex, If I use my private car and take them into my residence and there were some accident happening, is it likely for me to go bankrupt? Thank you! Lei

Answer: Accidents happen, and there are always risks of liability.  If someone staying in your home or traveling in your car is injured, there is always a risk that you will be sued.

You mentioned registering a company to protect your assets.  Limited liability companies and corporations offer exactly that, limited liability, but would likely not be very effective in this particular instance.  It would be cumbersome to place all of your personal property and your home into some form of business entity.  You would incur annual fees and have tax returns to prepare each year.

The better choice is likely to have good insurance, including an umbrella policy.  An umbrella policy is extra insurance which kicks in after your normal coverage has been exhausted.  Thus, it offers additional protection in the unfortunate event of an accident.  Umbrella policies are quite inexpensive.  A $1 million dollar cover age amount would likely only cost $150 to $300 per year.  This is less than the cost of creating and maintaining a business entity. 

You also mentioned bankruptcy.  Bankruptcy would be a last resort, but would likely protect all of your assets and your future income.  Wisconsin, like every other state, has exemption laws.  These laws designate certain kinds and types of property which are protected from the claims of creditors, up to certain dollar limits.

Wisconsin’s exceptions are fairly liberal and generous to debtors, so most people find that all of their assets are protected in the event they need to file bankruptcy.  Under the facts you set forth, a bankruptcy should eliminate any liability that might arise. 

This question and answer can also be found on Justia’s “Ask A Lawyer” section. Answer was provided by Attorney David Krekeler.

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