If you worked for a company as an employee, and the business was sued by a creditor or some other party, your own personal assets would be completely safe. Why should you and your family suffer because of the actions of the business?
Conversely, if you were to run into financial trouble, the company that you work for would be not be impacted. The same reasoning should apply when you are a small business owner. You can structure your enterprise in a way that separates your personal property from the business as an entity.
One possibility would be the utilization of a limited liability company. This is a relatively simple structure that is often used to protect assets. When you establish a limited liability company, your personal resources would be protected if legal actions were taken against the business, and vice versa.
Another advantage is pass through taxation. You would claim business profits and losses on your personal income tax return when you have a limited liability company, so your accounting would be simple and efficient.
No, this would be a fraudulent conveyance.
Yes, the family limited partnership (FLP) is often utilized. As the name would imply, people that are part of the partnership must be members of the same family.
If you establish a family limited partnership, you would be the general partner, and the family members that you add to the partnership would be limited partners. The general partner would have sole decision-making authority for the partnership.
Any asset that you convey into a partnership would be owned by the FLP as an independent entity.
For example, let’s say that you have an apartment building that is owned by a family limited partnership that you have created. If someone is injured in one of the apartments and a lawsuit is filed, the partnership would be the target. Personal property that is owned by the partners would not be protected.
To take this a step further, if you owned three different apartment buildings, you could convey each one of them into a separate family limited partnership. It should be noted that property that is held by a family limited partnership would be protected if a partner is personally sued.
Learn More About Asset Protection
We have prepared two separate in-depth reports that explain everything that you need to know about family limited partnerships and limited liability companies. They are being offered free of charge, you can visit our special reports page to obtain access to your copies.
Schedule a Consultation!
Our doors are open if you would like to discuss asset protection or any other estate planning or elder law matter with a licensed attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 310-337-7696.
