One crucial yet often overlooked step of setting up a small business is developing a protection strategy for the owner’s personal wealth. As a business owner, without taking the proper steps to protect yourself, your personal assets could be taken by creditors or through litigation.
If you wait until you encounter an issue that may put your personal financial security at risk, it may already be too late. You must protect yourself before you need the protection or suffer serious financial consequences.
What’s at risk?
Ultimately at stake is your own personal wealth – not just that of your business. Beyond this, you may also be at risk to a fraudulent conveyance claims. To know more about what specifically is at risk, research your local state laws or contact an experienced business attorney you trust.
How you can protect yourself
Though the specifics of how you can protect yourself will depend on your business, how it’s structured, and your particular state, here are a few guidelines to help you start protecting your personal assets:
· Establish a Trust: Anything you put in an offshore protection trust is outside of what the US court system has legal jurisdiction over. This makes pursuing these funds difficult. Another option is an irrevocable trust, that is, a trust that cannot be modified without the consent of the beneficiary. This establishes the funds in the trust as beyond the control of the grantor and therefore makes attaining them far more difficult for creditors.
· Setup a Life Insurance or Retirement Plan: In Florida, life insurance policies are protected by great asset protection plans. Optionally, contact an experienced business attorney you trust to help you setup a retirement plan that will also offer greater personal asset protection.
· Structure Your Business as a Corporation or LLC: Though this option does not work for everyone, it offers business owners protection from personal liability in any claims made against the business. To learn more, contact an experienced business attorney you trust.
· Utilize Equity Stripping: By stripping yourself of your invested equity while retaining your position as owner, you leave potential creditors little to nothing to pursue. Additionally, this may help you provide other benefits:
o Offering additional protection to any assets used for the business.
o Offering additional protection for property equity
o Offering additional protection for multiple properties without having to create more than one LLC.
Still have questions?
Please call us for a free appointment with Miami business attorney Yoel Molina in our Miami office at 305-548-5020.