If you are starting a business, asset protection should be built into the structure that you choose. This can and should be a consideration during the planning stages, but if you are a sole proprietor at first, you can make a transition with asset protection in mind. In this post, we will look at two commonly utilized asset protection structures for small businesses.
Limited Liability Companies
A limited liability company can be the right choice for many, and it is a very widely utilized solution.
If you establish a limited liability company, you would enjoy the benefit of “flow through taxation.” Your profits and losses would be reported on your regular personal income tax returns, so the accounting would be simple and streamlined. Plus, there would be no additional corporate taxes to pay.
In spite of this connection on the level of taxation, when it comes to litigation, there would be separation between your personal property and the business as an entity. As a result, if the LLC is sued, generally speaking, your own individually held property would be out of the reach of litigants seeking redress.
The same thing is true in the reverse direction. If you are personally sued, assets that are the property of the limited liability company would be protected. Once again, these are generalities, and there are nuances that you dig into if you download our special report.
We have released an in-depth special report on the asset protection benefits of limited liability companies. It will tell you everything you need to know, but it is written in a manner that is enjoyable to read and simple to understand. To obtain access right now, simply click the following link: report on limited liability companies.
Asset Protection With Family Limited Partnerships
Another possibility within the asset protection realm is the family limited partnership (FLP). You can tell from the name that people that are members of the partnership must be in the same family. If you establish a family limited partnership, you would be the general partner, and family members that you add to the partnership would be limited partners.
The dynamic is similar to that of a limited liability company with regard to direct ownership of property. Assets that have been conveyed into a family limited partnership would be distinctly separate from the personal property of the individual partners.
To provide an example to shed light on the way it would work in the real world, let’s say that you own a shopping center. Someone gets injured on the property, and they claim that the owners of the shopping center have been negligent.
You conveyed to the shopping center into a family limited partnership, so only the property that is owned by that partnership would be in play for the litigant.
If you own nine other pieces of rental property, they could be in nine separate family limited partnerships, and they would be protected as well. You can also leverage the amount of equity that you hold in the properties, so you can make sure that there is very little that can be taken.
We have another report that puts this asset protection strategy under the microscope. Simply visit our family limited partnership report page to take advantage of this very useful free resource.
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