Internal Claim

A A A

DEFINITION

A claim by a creditor that is restricted to the business's assets and not those of its owners. The liability for the claim arises out of the business itself. As long as the business is legally created and treated as an entity separate from its owners, creditors' claims against the business should not reach the assets of the business owners.

INVESTOPEDIA EXPLAINS

Business owners must work to protect their personal assets from creditors' claims against the business. Following that protection, businesses seek to protect assets that are part of the business itself. For example, a business may be owned by a corporation, while its business property can be owned by a separate real estate trust or limited liability company.

Understanding the nature of claims that can arise out of a business relationship can help business owners and investors determine the appropriate type of business entity to create or invest in. For example, general partnerships and limited partnerships are exceptions to the premise behind internal claims. General partners (of a general partnership or a limited partnership) are liable for the debts and liabilities of the partnership.



RELATED TERMS
  1. External Claim

    A claim against an individual that does not arise out of any relationship he ...
  2. General Partnership

    A arrangement by which partners conducting a business jointly have unlimited ...
  3. Unencumbered

    An asset or property that is free and clear of any encumbrances such as creditor ...
  4. Closed Corporation

    A business that is set up using a corporate business structure, but in which ...
  5. Limited Liability Company - LLC

    A corporate structure whereby the members of the company cannot be held personally ...
  6. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of ...
  7. Real Estate Investment Trust - ...

    A security that sells like a stock on the major exchanges and invests in real ...
  8. General Partner

    Owners of a partnership who have unlimited liability. A general partner is also ...
  9. Rollup

    A rollup (also known as a "roll up" or a "roll-up") is when ...
  10. Volcker Rule

    The Volcker rule separates investment banking, private equity and proprietary ...
Related Articles
  1. Should You Incorporate Your Business?
    Entrepreneurship

    Should You Incorporate Your Business?

  2. Cover Your Company With Liability Insurance
    Home & Auto

    Cover Your Company With Liability Insurance

  3. Litigation: Are Your Investments At ...
    Personal Finance

    Litigation: Are Your Investments At ...

  4. Filling The Gaps In General Liability ...
    Home & Auto

    Filling The Gaps In General Liability ...

  5. Pages From The Bad CEO Playbook
    Retirement

    Pages From The Bad CEO Playbook

  6. I know there is a form of deposit insurance ...
    Home & Auto

    I know there is a form of deposit insurance ...

  7. Protect Your Company From Employee Lawsuits
    Home & Auto

    Protect Your Company From Employee Lawsuits

  8. Turn Your Passion Into A Profitable ...
    Entrepreneurship

    Turn Your Passion Into A Profitable ...

  9. Who are Venture Capitalists?
    Investing

    Who are Venture Capitalists?

  10. How The Sarbanes-Oxley Era Affected ...
    Fundamental Analysis

    How The Sarbanes-Oxley Era Affected ...

comments powered by Disqus
Hot Definitions
  1. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  2. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  3. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  4. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  5. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  6. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
Trading Center