Asset protection is indispensable for every business owner. Earning wealth is important and protecting it is equally important. A comprehensive plan reduces or eliminates the risk of losing assets by keeping them away from creditors.
The first step in asset protection is determining what types of assets are at risk. A professional can help you understand how to use the asset exemptions allowed by Federal and State governments. Exempted assets are unaffected by legal judgments and the claims of creditors. Homestead property and tools of the trade are exempted in most US states.
Business owners need to take measures to protect business and personal assets. The organizational form in which the business operates plays an important role in determining asset protection. In a sole proprietorship the owner has unlimited personal liability, so it is advisable to avoid operating a business in this form. Limited partnerships are better than the general partnership form because the partners have limited liability. A Limited Liability Corporation is one of the best forms for asset protection. In many states the LLC protects the business interest of the company from the claims of the owners’ personal creditors, and owners’ assets are protected from claims against the company.
If you are interested in establishing a legal entity in another country, choose a jurisdiction that offers asset protection, ease of operation, flexibility, and tax advantages. Offshore company incorporation provides confidentiality for properties, bank accounts, and other assets.
In the corporate format, especially for small businesses, there is a risk that the names of shareholders, officers, and directors will be included in a lawsuit against the corporation. Plaintiff(s) will attempt to pierce the corporation’s limited liability protection. There may be judgments in which the courts disregard the legal protection of the corporation. Corporate principal shareholders and directors need to use a strong asset protection plan to protect personal assets. Consider using a Limited Liability Company to conduct your business. An LLC has more protection than a corporation and while the managing member might be named the other members cannot be named in a lawsuit.