Asset protection is an imperative part of business planning for any business owner. It is essentially a set of strategies and legal tools one can employ to protect the assets of the business owner from lawsuits and claims from creditors. A good example of an asset protection strategy for business owners is to set up an irrevocable trust to shield against lawsuits. Being a business owner in San Diego, your best bet is to seek the advice of an asset protection attorney in San Diego, who will review your assets, risks and financial goals. Next, the planning process will involve establishing legal structures like trusts and business entities to create legal barriers between prospective creditors and your wealth. These strategies mostly combine business and estate planning tools to create a airtight asset protection plan.
Why Asset Protection?
Asset protection stands between your wealth and lifestyle and bankruptcy in a time of crisis – when a frivolous lawsuit rears its ugly head. Without asset protection you could lose everything you worked so hard for. In the current litigious society that businesses function in, it is always wise to talk to a leading San Diego Asset protection attorney about the best asset protection plan for your business and assets. An important part of asset protection is understanding tax consequences of your actions. Tax troubles is one of the top reasons that a business owner can lose everything they have, and there is no legal shield to protect against the IRS. Business tax planning and preparation will help protect you from such tax troubles, as well as defaulted loans or leases.
Methods of Asset Protection
- Opt for the right business structure: as a sole proprietorship, you lay your business open to attack, and it offers little or no asset protection. Therefore, you have to carefully choose what sort of business entity you want your business to be. An LLC or a limited liability company is a common entity that provided a base level of asset protection. It is the most flexible entity to sustain an ongoing business or investment. It is also the most common entity for real estate investors as it has a wide flexibility and favorable tax treatment. It protects the assets that are held inside the LLC from claims that arise outside of the LLC and it protects assets that are held outside of the LLC from claims that are brought as a result of the LLC.
- Solid insurance: one of the first and basic steps for asset protection is making sure that all aspects of your business and assets are properly insured. Types of insurance you need to look into are general liability, auto, home and life insurance; business interruption insurance; malpractice insurance; fire casualty and liability insurance; officer’s and director’s liability insurance; and personal umbrella policies.
- Asset Protection Trusts: The final asset protection strategy is to set up an asset protection trust. Asset Protection Trusts can be either foreign or domestic. The big idea with an asset protection trust is that you transfer your assets to the trust (prior to knowledge of any threat of litigation) and you have a trustee who is tasked with protecting those assets. Because you do not have control of the assets anymore, and cannot hand them over, it will be difficult for a plaintiff to collect on a lawsuit. This can lead to a more beneficial settlement for you and your assets.
- Know your rights: knowledge of what you are legally bound to and not bound to, is one of the most important aspects of planning for asset protection. As any asset protection lawyer in San Diego will tell you, a clear knowledge of the ins and outs of every contract you have drawn up will take you a long way in holding your own in legal disputes. When you know more about your rights as a business owner, you have a better chance at protecting your assets. Also, choose the best asset protection plan that suits your unique business structure and will efficiently protect your wealth and assets.