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Home » Asset Protection Planning » Asset Protection for Small Business Owner

Asset Protection for Small Business Owner

July 1, 2020Asset Protection Planning

asset protectionIf you are a small business owner, you have to be concerned about asset protection. There are two structures that are very commonly utilized, and we will look at them here.

Limited Liability Company

One of the these asset protection structures is the limited liability company (LLC). If you establish your business as a limited liability company, generally speaking, your personal assets would be protected from entities that are trying to collect debts from the business.

The protections are solid, but they are not absolute. For example, if you personally and directly injure someone, you could be held liable. If you guarantee a loan that you have taken out on behalf of the business, your personal property would be in play if you default.

Another advantage that is gained through the utilization of a limited liability company is the pass-through taxation. You can claim business profits or losses on your personal income tax returns, and this streamlines your accounting.

Family Limited Partnership

Another business structure that can be the right choice for some people is the family limited partnership (FLP). As the name would imply, the people that comprise the partnership must be members of the same family.

If you establish an FLP, you would be the general partner, and the family members that you add would be limited partners. As the general partner, you would have sole decision-making authority.

A good way to explain the way it works is to share a simple, stripped-down hypothetical scenario. Let’s say that you own two shopping centers that generate a good bit of income. There is a lot of activity each day, so it is very possible that someone could get injured on your property.

Asset protection would be a very important consideration, so you could convey each of the shopping centers into a different family limited partnership. If someone files a personal injury lawsuit because they were injured in one of the centers, the other one would be protected.

Your own personal assets would also be protected from the litigant seeking redress. On the other side of the coin, if you or any other partner is personally sued, the shopping centers would be protected.

It should be noted that family limited partnerships can have value for people that are exposed to the estate tax. The exclusion is $11.58 million, so most families do not have to worry about it, but it is a major factor for those that do, because it carries a 40 percent top rate.

Members of such a partnership can transfer assets among one another at a tax discount, and this can be advantageous if you are exposed to the federal estate tax.

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Our attorneys are conducting webinars that cover a number of different important elder law and estate planning topics. They are being offered free of charge, so you have everything to gain and nothing to lose.

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If you have already learned enough to realize that it is time to put an estate plan in place, we are here to help. We are offering remote consultations while we are all going through the pandemic, so you can get the assistance that you need without leaving the comfort of your home.

You can call us at 310-337-7696 to set up an appointment, and if you would like to reach out electronically, simply fill out the contact form on this website.

 

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Scott Schomer, Estate Planning Attorney
Scott Schomer, Estate Planning Attorney
A graduate of Boston University School of Law, Scott P. Schomer is a frequent lecturer on estate planning and elder law issues, having discussed these important issues on local and national television. A seasoned courtroom advocate, Scott has obtained combined judgments and verdicts in excess of twenty-five million dollars for his clients. Scott has served as a member of the Los Angeles Superior Court Probate Volunteer Panel (PVP Attorney), Probate Settlement Panel and a Judge Pro Tempore. Scott's expertise has been recognized by his peers with such accolades as a life-time membership in the Multi-Million Dollar Advocates Forum, the Five Star Wealth Manager designation, and repeated nominations as California Super Lawyer.
Scott Schomer, Estate Planning Attorney
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