Your Liability
Unlike incorporated entities, trade names are one and the same with their owners, which means that they don’t offer business owner(s) limited personal liability for debts incurred by or legal claims lodged against the business. For some business owners, this might not be a concern. If you’re conducting business that has inherent risk involved, you might consider purchasing liability insurance for your registered trade name, and/or incorporating a business instead of operating as an unincorporated business name.
Unlike registered trade names, incorporated businesses like LLCs and business corporations have limited liability protections built into their business structure. Even still, owners’ limited liability for debts and damages incurred by the business’ activity may only be guaranteed if the business owner(s) properly maintains the business and treats it as what it is: a separate, legal entity from themselves. If, for example, a single member LLC’s business bank account is used by the business owner as a personal piggy bank, the owner could be found liable for the business’ debts.
You may choose to consider purchasing private liability insurance coverage to protect your personal assets and credit. You should discuss your options with a qualified corporate attorney, certified public accountant (CPA), and an insurance broker to understand your risk and what you can do to mitigate it.