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. Business

    1. An organization or enterprising entity engaged in commercial, ...
  3. Entity Theory

    The assumption that the economic activities of a business is ...
  4. Asset Protection

    The concept of and strategies for guarding one's wealth. Asset ...
  5. General Partner

    Owners of a partnership who have unlimited liability. A general ...
  6. Company

    An entity formed to engage in a business. A company may be organized ...
Related Articles
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Small Business

    What is a Partnership?

    A partnership is an organization where two or more owners operate a business.
  8. Small Business

    Using Life Insurance as a Business Succession Plan

    Life insurance can be a good succession plan tool for business partnerships.
  9. Investing

    Equity Stripping Leaves Creditors Empty-Handed

    Add additional debt to your real estate assets to keep the creditors at bay.
RELATED FAQS
  1. 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 >>
  2. What are the major types of business in the private-sector and how do they differ ...

    Learn more about how private companies are organized and how large and small companies differ from one another in organization ... Read Answer >>
  3. Can I buy insurance to reduce unlimited liability in a partnership?

    Find out why it is important to safeguard your general partnership in the even that one member becomes disabled, dismembered ... Read Answer >>
  4. Are stock investors technically creditors?

    Learn more about the differences between stocks and bonds. Find out if stock owners are corporate creditors and how bonds ... Read Answer >>
  5. If you have a house that is under your company name and you want to sell it back ...

    The answer to this question really depends on the type of legal entity your business is operated through. Businesses may ... Read Answer >>
Hot Definitions
  1. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  3. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center