Does setting up a company really protect your personal assets?
Does forming a company protect your assets? Yes… but not always. Find out in which cases you might be personally liable and how to avoid it.
Creating a commercial company is a common decision among entrepreneurs. One of the most frequent reasons: to protect personal assets. In commercial companies (such as an SL or SA), liability is limited to the capital contributed by the partners.
If the business fails, the partner should not lose their home or other personal assets.
In practice…
There are exceptions that can put your personal assets at risk:
1. Personal guarantees
It is very common that, when requesting financing, the bank requires the partner to guarantee the loan with their personal assets.
If the company does not pay, the bank will claim the debt from the guarantor.
2. Director’s liability
If the company faces a crisis and the director does not act with due diligence (for example, by failing to file for insolvency proceedings in time), they may end up personally liable to creditors.
Being a company director is not just a symbolic role: it carries legal obligations.
What if I’m self-employed?
You can limit your liability by registering as a Limited Liability Entrepreneur (ERL), but there are conditions:
You must register as such at the Commercial Registry.
You can protect your main residence if it is valued at no more than €300,000 (or €450,000 in large cities).
The rest of your assets remain subject to seizure.
Can other assets be protected?
Yes, but with limitations:
They must be business-related assets (equipment, machinery, etc.).
They must be registered in the Movable Property Registry.
Protection is limited to the aggregate turnover of the two previous years.
It is unclear whether the asset’s value is determined at the time of registration or at the time the liability is claimed.
How to protect yourself
Before starting your business, carefully evaluate the most appropriate legal structure and take preventive measures to safeguard your personal assets.
A well-structured company can be an excellent tool, but it’s not an absolute shield.
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