What is an LLC?
The acronym “LLC” stands for a limited liability company. You could establish this type of company as your business entity if you are concerned about asset protection. If you are not, you should be, because it is important to separate your personal property from your business assets.
Instead of filing your taxes as a sole proprietor, you could establish a limited liability company. If you go this route, you would benefit from pass-through taxation that would allow you to claim profits and losses on your personal income tax forms.
Your accounting would continue to be streamlined, but your personal assets would be protected if the business entity was targeted by a litigant seeking redress. Conversely, if you were to be personally sued, property that is owned by the limited liability company would be protected.
Can you move assets into a limited liability company after you know that you are going to be sued?
If you were to do this, it would be looked upon as an illegal fraudulent conveyance, so the answer is no.
Are there any other asset protection structures for small businesses, professional practices, and real estate investors?
Yes, you could choose to utilize a family limited partnership (FLP). As the name would imply, all the partners must be members of the same family. If you establish and fund such a partnership, you would be the general partner, and the family members that you include would be limited partners.
To explain the asset protection value by way of example, let’s say that you own two different apartment buildings, and you rent out the units. Clearly, it is possible that someone could get injured in one of these properties, so you would be exposed to potential personal injury lawsuits.
You could convey each apartment building into a separate family limited partnership. If somebody is injured in one of the buildings and they file a lawsuit, they would be suing the FLP that owns that building. The other rental property would be out of play, along with your personal property and property that is individually owned by each of the other respective partners.
The asset protection works in the reverse direction as well. If you or any of the other partners was to be sued personally, the property that is held by the family limited partnerships would be protected.
Is there a way for an individual to protect assets from future creditors or lawsuit liability?
We practice law in Nevada, and in the Silver State, you can create a self-settled asset protection trust to shield resources. It would be an irrevocable trust, and you would not have direct access to the principal. However, you could be a beneficiary, and the trustee would have the discretion to distribute trust assets to you.
Access Our Asset Protection Reports
We have provided a bit of basic information here, and you can really build on your knowledge if you download our free special reports on asset protection. One report provides more details about family limited partnerships, and the other is devoted to limited liability companies.
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