Guarding your wealth: Asset protection for your business

moneyBusinesses more than any other category face significant challenges and insurmountable risks when they offer their products and services in the market. Business operations are so risk-prone that very few firms actually survive and succeed. In fact, success by itself poses the most significant challenge; the challenge of preserving one’s wealth and of planning one’s estate in such a way that all assets are comprehensively protected.

Exactly What Does the Term “Asset” Mean?

An asset is any entity that has value, whether it is your business equipment, your industrial infrastructure, stocks, bonds, bank balance, the cashable value of your insurance policy – anything and everything that has measurable value for the business becomes an asset worth protecting.

Why Do We Feel That an Asset Is Worth Protecting?

When a business grows exponentially, its asset base also grows and diversifies. Each asset begins to acquire a risk profile. Malicious people, catastrophic events, natural calamities, and lawsuits have the potential of wiping out assets in the blink of an eye.

All it takes is a contingency fee to hire a top shot lawyer to take on a successful business. No matter how you are placed in the hierarchy of success, an unprotected asset can become a sitting duck for frivolous litigation. Meticulously crafted asset protection solutions by CS&P safeguard your business from malicious intent.

What Is a Liability Risk Exposure in the Case of Businesses?

First off the block is inside liability; this is the risk of a lawsuit emanating from your employees, clients, partners, and contractors. An outside liability is a lawsuit brought on by people who may not be directly involved in your business operations but who may file claims and compensation for perceived damages or injury you are accused of inflicting in the day to day business operations.

Whether a threat is inside or outside, a liability suit could attach not only one’s business assets but could also compromise personal assets.

Asset Protection for Your Business Entity

You can cocoon your enterprise in a legally protective framework depending on the kind of business formation that you eventually choose.

Differentiating Personal Wealth From Business Assets: Limited Liability Companies (LLCs)

Legally shifting your base from a single-owner sole-proprietorship firm to a Limited Liability Company (an LLC) is a powerful form of asset protection. Basically, such a move gives you greater flexibility in business operations and significant tax advantages.

An LLC becomes a hedge against both inside and outside liability through “Charging Order Protection.” If creditors bring a Garnishment order attaching your personal income, they’ll be forced to satisfy the debt through your business assets before coming after your personal wealth. In the meantime, a general body meeting can conclude that you’ll not receive any income during the pendency of the suit, and that adds one more layer of personal protection.

The LLC can also strengthen protection through a standard ‘Operating Agreement.” This is a legally permitted way of clearly outlining the roles and responsibilities of the company management team. By assigning operations responsibility to key managers, you can move outside the purview of most liability suits.

Shielding Scalable Wealth Effectively Through Corporations

A corporation can be described as a more formalized, rigidly established a legal framework that functions as an elder brother version of the LLC. This entity allows you to go public, gain tax advantages, improve revenue streams, and sell securities to raise funds from the general public.

You can dramatically scale your business operations through the corporate route. But being a publicly traded stock, you’ll attract more than your fair share of creditor lawsuits. The decisive point is that your inside liability will be limited just as the business’s outside liability increases. Just like in an LLC, you can leverage charge order protection to safeguard personal assets.

Limiting Liability to the General Partner: Limited Partnerships

A popular asset protection strategy is to lay the legal foundation for a Limited Partnership. In this framework, you could choose to be the limited partner sourcing funds and investing in the company while enjoying a passive income. The full thrust of a liability action will rest on the shoulders of the General Partner who decides policy and oversees business operations.

5 Asset Protection Strategies That Go a Long Way in Protecting Personal Wealth

Homestead Laws

Texas and Florida are a few states that offer more stringent home protection against third-party lawsuits. In such instances, the creditor has to satisfy the dues from the sale of company assets before he comes after the home or personal property

Cash Value of Policies

Insurance is not a bad deal; it protects your family when you are no longer around. The cash value of such policies is protected in most states that frown on third-party judgment suits attaching personal wealth.

Federal Retirement Fund Protection

Under the ERISA act, lawsuits cannot bring retirement benefits under the purview of individual and class action suits.

Joint Ownership Title Protection

Consider shifting from single-owned assets to a form of joint ownership with your spouse. This gives you protection from lawsuits that target one of the partners.

Asset Protection Trusts

Another phrase that describes this is “Irrevocable Trust” which is a combination of asset protection and estate planning. This is a safe way of moving important assets (company or personal) outside the purview of personal liability. Many use it to create a non-marital asset that can’t be proceeded against in divorce hearings.

Conclusion

Just as you focus all your energies on growing your business and accumulating assets, spare a thought for asset protection strategies that combine wealth preservation with astute estate planning. It could be your only protection against unstoppable claims, unexpected business collapses, and unsavory litigation that could place hard earned money and your assets under third-party control.

 

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