What is Oklahoma individual liability and why does it matter?

Diplomatic Security Service from Flickr User BSAC_Mock Dignitary Protection

We are talking about Oklahoma asset protection. That is, protecting your assets from being taken by a creditor or another party that has a judgment against you, individually.

Fortifying your assets
One way to fortify yourself and protect your assets is to do business through an Oklahoma entity. When I say entity, I am generally talking about an Oklahoma limited liability company or an Oklahoma corporation.

You form the entity, and then you use the entity to conduct business. For example, I have clients you have rental properties and they have created at least one LLC to own the rental property.

Explanation of the Mechanics
Here is how the protection works: 

For a rental property, the entity enters into a lease with a tenant. If for some reason, the property generates liability for the owner and the tenant or another party trying to recover against the owner, the creditor has to start by recovering against the entity rather than against the person who formed the entity.

The Wall of Separation
That means there is a wall of separation between what you own individually, for example, if your home and your cars, and what your business owns, which is the rental property. While there are some circumstances where a creditor could reach your individual assets, it is much more difficult when the creditor has to pierce through an entity that is out front.  For more information about piercing through the corporate veil in Oklahoma, consider – 5 Steps to prevent your Oklahoma corporate veil from being pierced

If, in my rental home example above, the owner owns the property in his or her own name and lease is the property in his or her own name then the owner is going to be liable if there is liability created which means the owner is putting all of its assets at risk. There’s no reason to have this happen using an entity to do business and if you need help getting that entity set up or getting started please reach out to me.  

 

Posted by Shawn Roberts

On this blog, I write about and try to answer practical Oklahoma legal questions. My focus and most experience is in estate planning and business issues including Oklahoma non-compete law. I make a living as an attorney in the law firm I founded, Cazes Roberts, PLLC in Oklahoma City. I live in Edmond with wife Amy and my two children, Sam (17) and David (9). We live precisely in the path of where the "wind comes sweeping down the plains."