External Claim

Dictionary Says

Definition of 'External Claim'


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 pursue the business to satisfy the external claim against the individual business owner/debtor.

Investopedia Says

Investopedia explains 'External Claim'


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.

However, some entities, such as limited partnerships and limited liability companies, provide their partners/members with protection from claims arising outside of the entity. Many states only give outside creditors the right to attach or garnish distributions made from the entity to the debtor and do not allow the creditor to attach or sell the debtor's interest in the entity. Thus, management control of the entity remains intact and the debtor's interest in the entity is protected.

comments powered by Disqus
Hot Definitions
  1. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  2. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  3. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  4. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
  5. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
  6. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
Trading Center