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Definition Of External Claim:


A claim against an individual that does not arise out ofany relationship he or she may haveto a business in which the individual has an ownership interest.
Depending onhow the business is owned, the creditor may be able to pursue thebusiness to satisfy the external claim against the individual business owner/debtor.Simply setting up a business in an entity, such as a corporation,maynot protectit from the owner's personal creditors. External claimsagainst a business owner may be satisfied byhis or herinterest in the business entity.However, some entities, such as limited partnerships and limited liabilitycompanies, provide their partners/members with protection from claimsarising outside of the entity. Many states only give outside creditors the right to attach or garnish distributions made from theentity to the debtor and do not allow the creditor to attach or sell the debtor'sinterest in the entity. Thus, management control of the entity remains intact and the debtor's interest in the entity is protected.

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