The cost of being sued

Discussion in 'Growing and Managing a Business' started by zig&zag, Apr 8, 2011.

  1. zig&zag

    zig&zag
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    I have recently started a business with a friend. We provide short course training. We are operating as a sole trader and have taken out indemnity insurance. The value of this insurance is, of course, limited. So what would happen in the unlikely event that someone sued us for more than the value to which we are covered? Also would registering a limited company provide us with more protection? I have heard that it is not quite that straightforward as this because company directors can be personally held financially liable under certain circumstances, is that true?
     
  2. Fergal

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    Welcome to our Business Forum zig&zag. Are you based in Ireland?

    The liability would fall on the individuals behind the business.

    By the way is there a reason why you are a sole trader and not a partnership, when there are two of you in the business?

    Yes it would, because the company is a legal entity separate from the owners of the company, in the eyes of the law. However, as you say, the courts may still look to see that the directors did not act negligently or inappropriately, depending on the factors in the individual case.

    Is there anything about the training you provide that is particularly dangerous or that causes you particular concerns regarding being sued?
     
  3. zig&zag

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    Hi Fergal, thanks for the response

    No, I'm located in the south east of england

    That's a good point. We chose to begin as a sole trader just to keep the paper work etc. simple. We plan to form a limited company in a few years time. But from what you've written it sounds like it may be better to change to that structure sooner.

    No not really. My colleague and I have most of the skills needed to run an effective business but I'm very aware that we don't have much knowledge of the legal side. Also there seems to be a suing culture these days.
     
  4. Fergal

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    Thanks for replying back zig&zag. You should probably consider having a chat with a solicitor or accountant. Many of them will give a first consultation free of charge. This initial consultation could give you a lot of the info you need, point you in the right direction and give you a good contact for future reference.

    Good luck with the business and I hope we see more posts from you here on the forum.
     

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