You will take considerable time and cash to build a thriving company. Your hard work and invested cash might, however, be washed down or wiped out in an instant by an adverse court ruling. Based on recent statistics, someone files a lawsuit against a business every two seconds.
One of these days, therefore, you might find your company slapped with a suit for one reason or another. With a few techniques, however, you can protect your business assets from lawsuits without breaking the law.
Getting a captive insurance lawyer to help you invest in this form of insurance is one of your options. A captive insurer is a company that is entirely owned and controlled by the people who are insured. It primarily protects the owners who also benefit from its underwriting profits.
Unlike a mutual insurance company, you invest assets in the captive insurance company and thus proactively participate in its management. Here are your other legal options for protecting your business assets.
Real estate, in most cases, is a business’ biggest asset. Some states forbid your creditors from seizing your primary residence, but other real estate assets can be seized irrespective of your home state.
Land trusts are your best choice, whether you only own your house or several real estate pieces. A land trust not only holds your real property in confidentiality but also allows you or your business to direct its management while benefiting from it.
Limited Liability Company (LLC)
This business entity shields your business’ shares from creditors and also protects your manager’s and members’ personal assets. The LLC is the most common option for holding real estate and stock market investment portfolios while still operating your business.
Some states, however, introduced a law in 2010 that allows creditors to seize your membership interests if you have less than two members. You should thus be well-versed with your state laws before choosing an LLC for your assets’ protection.
You can use an S or C corporation for the protection of your company’s assets. Not only will a corporation protect your personal assets, but it also suffices as a limited liability alternative for directors and shareholders.
This way, it protects your business’ assets from corporate debts. A corporation will however, not protect personal service providers like consultants, doctors, and accountants.
These will work in much a similar way as domestic trusts though your trustee, in this case, will not be a US citizen. An offshore trustee is not subject to the orders issued by a US-based court and might fight to protect your assets. Offshore trusts should ideally be established before someone sues your company and done by an expert to guarantee they work for your business’ assets protection.
While asset protection is vital to keep your assets safe, it is essential to use the right protection alternative for your assets. Considering litigation costs could be as high as $150,000 for a small business, working without an asset protection strategy in place is setting your company for failure.
Even with the information above, it is still essential to get the best attorney to guarantee your asset protection structure works for you.