Asset protection refers to the concept of guarding your wealth. Essentially, it helps keep your assets safe from future lawsuits, creditors or divorces. Keep in mind that if you don’t do any type of asset protection planning, your property may get taken away from you. Because of this, it’s important to come up with good strategies to protect your wealth both in the corporate world and your personal life.
Start Devising a Plan Now
It will be too late for you to come up with an asset protection strategy if you’ve already been served with a lawsuit. That’s why it’s important to take action prior to a claim. Keep in mind that having a good strategy in place may even discourage others from suing you. Know that whatever you do after a liability or claim arises can be undone due to fraudulent transfer law. This law refers to the transfer of assets with the intention to defraud the creditors.
Having a Two-Person Partnership Doubles Your Risk
When you’re in a two-person partnership all it takes is for your partner to make a mistake and it will be like you made it as well. Entering a partnership should be done after much consideration and is not something you should dive into. Remember that you will be both liable for each other’s errors and actions. In the event that your partner makes a huge mistake and gets served with a lawsuit, you could end up losing everything.
Avoid Incorporation Scams
Incorporation is a term used to describe a legal process during which corporate entities or companies are formed. When you start doing research on ways to protect your assets, you’re bound to encounter scams that offer incorporation services for less than a hundred dollars. However, know that your assets won’t be protected for such a small investment. If this were an option, everyone would go this route and save a lot of money.
Keep Your Personal Assets Separate from Your Business Assets
This is without a doubt one of the most important rules when it comes to asset protection planning. In case your business isn’t a registered entity, you could end up losing your personal assets if you’re served with a lawsuit.
Protect Your Business Assets with an LLC
The single best way to protect your business assets is with the help of a Limited Liability Company (LLC). An LLC refers to a corporate structure whereby members of a certain business aren’t personally liable for the liabilities or debts of the company.
Use Trusts to Protect Personal Assets
Just like you can use an LLC to protect your business assets, it’s a good idea to set up trusts in order to protect your personal assets. By setting up an asset protection trust, you will transfer ownership of a property or fund to a trustee and protect it from creditors.
Keep the Plan Simple
You should never try making a complicated asset protection plan because your creditors or a judge may get suspicious. Keep in mind that they will review your plan at some point and you will have to explain exactly why certain assets were transferred and how they’re held. If you can’t do this, they’ll start suspecting something is up.
Have a Commercial Insurance Policy
Having a detailed commercial insurance policy will keep you covered and ensure you don’t lose your property in case of a lawsuit or judgment. Nevertheless, it’s important to make sure your insurance policy is up-to-date.
Everything Sees the Light of Day
When you start devising an asset protection strategy, you should be aware of the fact that every piece of information will probably become known to creditors sooner or later. Because of this, it’s recommended to avoid hiding information in order to avoid problems like losing your assets.