BULLETPROOF COMPANY STRUCTURING
What are the Various Asset Protection Strategies?
Over 40 Million lawsuits are filed every year in the USA with an additional 1 million attorneys joining the workforce every year!
– U.S Financial Education Foundation
In essence, this means that you must always remain vigilant, and take the necessary steps to protect yourself from potential litigation.
There are three key asset protection strategies. They include:
Using Limited Partnerships (LPs), Corporations, and Limited Liability Companies (LLCs)
The government protects owners of limited liability companies, corporations, and limited partnerships through limited liability laws. Typically, individual owners of such entities are exempted from the organization’s debt.
Therefore, you can use such businesses to borrow credit and protect your assets from seizure. However, using this strategy to protect personal assets is often deemed unethical. Several U.S. laws allow creditors to permeate LLCs and corporations in special cases and hold the individual liable.
When Should You Initiate Asset Protection?
You can initiate asset protection at different times. However, You must set up your structure prior to a lawsuit in order to protect your assets.
Initiating asset protection early helps prevent a fraudulent ruling since it’s a civil case, not a criminal one. You also get reasonable negotiation leverage, ensuring a favorable outcome from the lawsuit or claims.
More Ways to Protect Your Assets
Limited Liability Limited Partnership
A newer kind of entity called LLP, protects the general partner from personal liability for the debts incurred by the partnership. This entity has a protective barrier of setting up multiple layers of entities in a simpler, more refined approach.
When your business enterprise becomes a limited liability limited partnership, you can always rest assured knowing that the only assets you are risking are the assets that you invest in your business.
Family Limited Partnership
A family limited partnership (FLP) is a limited partnership that only contains members from the same family.
One of the biggest and most favored advantages of our FLP’s is the tax benefits. If a family member chooses to purchase both a general partnership interest and a limited partnership interest and they transfer these limited partnership interests to other members of their family, the transferring party gets to reduce the taxable value of their estate. This ensures complete control over the management and investment decisions of your company, and the transferees, who are not granted authority to make decisions regarding these matters. This could make others able to take advantage of valuation discounts when the transfer is complete.
Protection for My Real Estate
Real estate can be a valuable investment, but often is accompanied with both risks and liabilities. If your properties are titled to a person rather than a business, you are then personally liable for any form of damage and loss regardless of where they come from (i.e. accidents, injuries, etc.).
If any of your properties are involved in any kind of lawsuit, your personal assets are at risk. This could include anything from cars, to your house, your bank accounts, or other real estate investments you own.
Nevertheless, there are ways to protect your assets by placing your properties in business entities in order to create a protective barrier between you and the owned assets. This ensures that it becomes far more difficult for a judgment creditor to hunt your assets in any lawsuit that could involve your investment property.
Protection for My Business Equity
An asset protection planning strategy that can limit liability risks, is the use of holding and operating companies. The ideal business structure has an operating entity that owns no vulnerable assets while the holding entity owns the assets of the business. Within this structure, small business owners could eliminate or significantly limit the liability of both the personal and business debts.
Asset Protection For Medical Professionals
Real estate can be a valuable investment, but often is accompanied with both risks and liabilities. If your properties are titled to a person rather than a business, you are then personally liable for any form of damage and loss regardless of where they come from (i.e. accidents, injuries, etc.).
If any of your properties are involved in any kind of lawsuit, your personal assets are at risk. This could include anything from cars, to your house, your bank accounts, or other real estate investments you own.
Nevertheless, there are ways to protect your assets by placing your properties in business entities in order to create a protective barrier between you and the owned assets. This ensures that it becomes far more difficult for a judgment creditor to hunt your assets in any lawsuit that could involve your investment property.
Investment Grade Insurance Contracts
An investment grade insurance contract allows you to invest your money without paying taxes on its growth. Furthermore, you can make withdrawals as needed, without having to pay taxes on the withdrawal. In essence, you can save your money while receiving interest on it, without having to pay taxes on it as it grows.
Upstreaming
Tax upstreaming is a money-saving practice in which a C-corporation based in one state “upstreams” its earnings to a subsidiary based in another state. The corporation can thus avoid paying state income tax in its home state if everything is done correctly. The strategy is most effective when upstreaming to a company in a state with no income tax, such as Nevada or Florida.
Which Business Entity Is the Best Choice for Me?
Businesses vary according to their goals, costs, investor interests, risk tolerance, and financial standing. There will never be one perfect choice for everyone when it comes to the best entities to use for your business. The options vary from anything from sole proprietorship which provides no protection for personal liability, to a complex choice with multiple layers of business entities and provides maximum personal liabilities and anything in between.
Business in Nevada
Nevada legislature has pushed for the creation of a business-friendly legislature for years in order to make it a more attractive state for businesses looking for tax advantages and laws that promote their business rather than smother it. Fortune magazine stated that “Nevada’s attraction is that it has one of the lowest costs of doing business in the West” therefore making it one of the best states in America for business.
Buy Sell Agreement
Divorces can wreak havoc on the family’s personal life, but they can have the same effect on a partnership or joint venture. Avoid the problem with a buy/sell agreement stipulating that upon a voluntary or involuntary divorce, the agreement kicks in immediately. The partners buy out the divorcing partner’s interest at a fair market price. This eliminates the possibility of having to deal with those unplanned partners before the situation arises.
Maintaining the Corporate Veil for Your Entities
A key point to remember is that the corporate veil is fragile. You have to treat it carefully and protect it at all times. Once you set up your entity and run it properly you will have created a corporate veil that will be extremely difficult to pierce if it can be pierced at all.
Business Structures
Business structures have a significant impact on various aspects of a company, including liability, management, taxation, and capital raising. Limited Liability Companies (LLCs) provide liability protection for members while allowing for simplicity and flexibility in management. C-Corporations (C-Corps) offer limited liability for shareholders but are subject to double taxation, making them more suitable for larger, publicly traded companies. S-Corporations (S-Corps) pass income, deductions, and credits through to shareholders to avoid double taxation while still providing liability protection. Partnerships involve two or more owners who operate a business together and have their business income taxed at individual tax rates. Series LLCs allow for multiple cells within a single company, each with its own liability protection and tax planning options. Ultimately, the choice of structure depends on the specific needs and goals of a business.
