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.

BREAKING DOWN '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.

RELATED TERMS
  1. External Claim

    A claim against an individual that does not arise out of any ...
  2. Adjuster

    An insurance claims agent. A claims adjuster is charged with ...
  3. Asset Protection

    The concept of and strategies for guarding one's wealth. Asset ...
  4. Business

    1. An organization or enterprising entity engaged in commercial, ...
  5. Partnership

    A business organization in which two or more individuals manage ...
  6. Entity Theory

    The assumption that the economic activities of a business is ...
Related Articles
  1. Trading

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.
  2. Small Business

    Which Type of Organization Is Best For Your Business?

    Learn the differences between the types of business organizations so you can determine how to best structure your business for tax and liability limitations.
  3. Small Business

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  4. Managing Wealth

    5 Reasons Small Business Owners Sell Their Companies

    Selling a business you've built from scratch isn't done lightly. Consider these moments when the opportunity might be right for you.
  5. Small Business

    Small Business: It's All About Relationships

    Rather than be a jack-of-all-trades, an owner should rely on a network of trusted experts.
  6. Small Business

    What is Unlimited Liability?

    Unlimited liability means that the owners of a business are liable for the entire amount of debt and obligations of that business.
  7. Small Business

    4 Management Tips for a Seasonal Business Owner

    Learn about ways for business owners running seasonal businesses to ensure the lives of their businesses and promote success through the off-season.
  8. Small Business

    Don't Get Sued: 5 Tips To Protect Your Small Business

    Find out what you can do to limit risk and keep your business running smoothly.
  9. Small Business

    Creating a Risk Management Plan for Your Small Business

    Learn how a complete risk management plan can minimize or eliminate your financial exposure through insurance and prevention solutions.
  10. Small Business

    The 4 Most Common Reasons a Small Business Fails

    Discover the most common reasons small businesses fail, including capital formation, management concerns, planning issues and marketing missteps.
RELATED FAQS
  1. Do companies have to pay back their paid-up capital?

    Learn what business structures are available to entrepreneurs, and learn the process for making the most appropriate selection ... Read Answer >>
  2. What risks does a business owner face under a business structure with unlimited liability?

    Understand the types or risk a business owner faces under a business structure with unlimited liability. Learn why a business ... Read Answer >>
  3. What are some examples of how corporations manage short-term investments?

    Learn how a business owner can protect against significant liability by forming a corporate entity structure, and understand ... Read Answer >>
  4. What's the difference between a financial plan and a financial forecast?

    Learn which types of business structures present the greatest amount of risk through unlimited liability to the owner or ... Read Answer >>
  5. What's the difference between limited liability partnership and general partnership?

    Learn the differences between general partnerships and limited liability partnerships; each type has unique traits, benefits ... Read Answer >>
  6. What are the full rights of creditors in cases of bankruptcy?

    Learn more about corporate bankruptcy and the rights of creditors. Find out how creditors are repaid in the event of bankruptcy ... Read Answer >>
Hot Definitions
  1. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  2. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  3. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  4. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  5. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
  6. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
Trading Center