External claim - How To Discuss

The ability of a creditor to make a claim against a debtors business assets should the individual business owner be unable to pay a debt. Limited liability companies and limited partnerships are protected from such claims if the debt is incurred by one of the partners outside of the entity. Additionally, some states only allow creditors to file a claim against the individual debtor and not the entity in which he/she may have an interest. Opposite of internal claim.

An external claim is a claim against an individual that does not arise out of any relationship he or she may have to a business in which the individual has an ownership interest. Depending on how the business is owned, the creditor may be able to legally pursue assets of the business to satisfy the external claim against the individual business owner/debtor.

Simply setting up a business in an entity, such as a corporation, may not protect it from the owner's personal creditors. External claims against a business owner may be satisfied by his or her interest in the business entity.