Internal Claim

Definition of 'Internal Claim'


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 'Internal Claim'


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.



comments powered by Disqus
Hot Definitions
  1. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.
  2. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another market so that it balances out. So when examining a specific market, if all other markets are in equilibrium, Walras' Law asserts that the examined market is also in equilibrium.
  3. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
  4. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.
  6. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious debt when government leaders use borrowed funds in ways that don't benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated.
Trading Center