As a comprehensive, full service estate planning, elder law, and financial planning resource, asset protection is an area of expertise for our firm. If you are an owner or a business partner, you should choose a business structure that will separate your personal property from your business assets.
Limited Liability Companies
The limited liability company is a widely utilized asset protection solution. With this type of structure, the business is responsible for its own debts. Creditors that are owed money by the limited liability company cannot go after the personal property of the owner or owners.
This protection also works in the reverse manner. If an individual that is the owner of a limited liability company is being sued by a creditor, the property of the LLC would be protected. However, there is the matter of fraudulent transfers to take into account. If property is transferred into a limited liability company as an after-the-fact response to legal actions against the owner, it would be a fraudulent conveyance. Under these circumstances, the assets in question would not be protected.
We should point out the fact that a creditor of the owner of an LLC could endeavor to obtain a charging order from a court. In spite of this, since the charging order does not allow creditors to participate in the management of the LLC, they often receive nothing.
Family Limited Partnerships
Another very useful asset protection device is the family limited partnership. As the name would indicate, people participating in the partnership must be members of the same family. The person that establishes the partnership would be the general partner, and the others would be limited partners. A family limited partnership is not a democracy; the general partner has all of the decision-making authority.
Property that has been conveyed into the family limited partnership would be separate from the personal property of the respective partners. As a result, if a partner is sued personally, property in the FLP would be protected. Conversely, if the family limited partnership was targeted by a litigant, the personal property of the partners would be protected.
Succession Planning for Business Partners
Partners in small businesses can devise a succession strategy through the creation of a buy-sell agreement. This would involve the partners deciding on the value of a share in the business. They would take out insurance policies on one another equal to this amount. When one of the partners dies, the proceeds from the insurance policy would be used to purchase the share that was owned by the deceased from his or her family.
Schedule an Asset Protection Consultation
If you would like to discuss any of these asset protection strategies with our firm, you can schedule a free consultation if you call us at (209) 416-0353.