Consider all the time you have spent or will spend building your business – and then consider how much energy you have spent on how to protect it or protect your family from it.
Unfortunately, many small business owners don’t give much thought to asset protection until it’s too late – when a suit is filed, a divorce happens, or a creditor comes after them.
The National Federation of Independent Business says that small businesses make excellent targets for frivolous lawsuits because they usually settle out of court rather than spend what it takes to go to trial. It is estimated that the average number of times a business is sued over the lifetime of its owner is five times. Even if you are a good person.
Here are 5 tips for small business owners to protect assets:
1. Don’t hide your assets. If you get sued, prepare to divulge what you have. You will likely face a deposition with opposing counsel asking about your assets, so lying is committing perjury. Instead, have a good asset protection plan in place – then you can disclose without worry.
2. Don’t transfer assets to family or friends. They may have bigger problems than you do. GIving away your assets as a form of asset protection is a risky strategy. There’s far better ways to handle things.
3. Don’t put assets in a spouse’s name. Anyone can be sued for any reason, so putting assets in a spouse’s name is no guarantee that your assets are protected and if you get sued and a judgment is issued, you can be sure your spouse’s assets will be looked at closely.
4. Follow the law. Tax evasion and fraudulent conveyance are crimes. There are many ways to legally protect your assets; don’t get sucked into seriously risky business that could put you in jail or subject to huge fines.
5. Put assets in a protected entity. At the bare minimum, your businesses (and real estate) should be put into an LLC or an S-Corporation. Doing that will protect your personal assets from the activities of the business.
But what about protecting the business itself from your activities, such as divorce, bankruptcy or other creditors? For that kind of asset protection, we have wonderful strategies that are completely legal, onshore and not only protect your assets from creditors, but saves big money on estate taxes for future generations as well. They are a big win all around.
If you have questions about asset protection for yourself and your business, contact us today. We would also be happy to schedule a comprehensive LIFT (legal, insurance, financial and tax) Foundation Audit. Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.