Consider all the time and effort you have spent building your business; now consider how much energy you have spent on protecting it or protecting your family from potential business liability.
Unfortunately, most small business owners don’t give a second thought to asset protection until it’s too late – when a suit is filed, a divorce happens, or a creditor comes after them.
The National Federation of Independent Business says that small businesses make excellent targets for frivolous lawsuits because they will usually settle out of court rather than spend what it takes to go to trial. It is estimated that the average number of times a business is sued over the lifetime of its owner is five times. It doesn’t matter that you are a good person.
Here are 5 tips for small business owners to protect assets:
1. Don’t hide your assets. If you get sued, prepare to disclose what you own. You will likely face a deposition with opposing counsel asking about your assets, and lying is committing perjury. Instead, it’s better to have a good asset protection plan in place – so that you can disclose without worry.
2. Don’t transfer assets to family or friends. You never know, they may have bigger problems than you do. Giving away your assets as a form of asset protection is a risky strategy, and in certain cases may be fraud – which puts you in even hotter water. There are far better ways to handle things.
3. Don’t put assets in a spouse’s name. Anyone can be sued for any reason, so putting assets in a spouse’s name is no guarantee that your assets are protected. Also, if you get sued and a judgment is issued, you can be sure your spouse’s assets will be looked at closely.
4. Follow the law. Tax evasion and fraudulent conveyance are crimes. There are many ways to legally protect your assets; don’t get sucked into seriously risky business that could put you in jail or subject you to huge fines.
5. Put assets in a protected entity. At the bare minimum, your businesses (and real estate) should be put into an LLC or an S-Corporation. Doing that will protect your personal assets from the activities of the business, provided that you are handling things right. But what about protecting the business itself from your personal activities, such as divorce, bankruptcy or other creditors? For that kind of asset protection, we have an airtight strategy that is completely legal, onshore and not only protects your assets from creditors, but saves big money on estate taxes for future generations as well. It’s a big win all around.
If you have questions about asset protection for yourself and your business, contact us at (612) 206-3701 or fill out our contact form today to set up a small business consultation session.
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