Asset Protection
You’ve worked hard for your assets (not your biceps, friend). And, of course, you want to protect them. Asset protection refers to the strategies and techniques you’ll use to shield what you’ve got from creditors.
There are many ways that your wealth could be drained...from lawsuits against a business entity that doesn’t offer personal asset protection, to divorce and bankruptcy. That’s where a few helpful asset protection strategies come in handy.
One example of an asset protection strategy would be to choose an appropriate type of business entity. The rule of thumb for asset protection is that you want to separate your business from personal liability. Sole proprietorships and general partnerships DO NOT offer liability protection, thus disqualifying them from this category. If you get sued or owe a creditor money (in relation to your business), your assets are not safe. This is one of the many reasons to consider choosing a corporation or limited liability company (LLC) as a business entity (the type of business you establish).
To further protect your assets, you’ll also purchase appropriate insurance (including supplemental insurance), use retirement accounts to safeguard you in the event that bankruptcy becomes an unavoidable reality, set up a trust for your personal assets, and maybe even transfer assets to someone else in appropriate situations. All these strategies (and a whole bunch of strategies that we haven’t named in this short description) make up the concept of asset protection as a whole.
Related or Semi-related Video
Finance: What is an LLC?4 Views
finance a la shmoop. what is an LLC? LLC no that's not a rapper, that's a limited
liability company or look as professionals in the business pronounce
it. well why do you want one? because limiting your liability is a [man explains]
good thing if you're the one potentially liable for that stooge who slips on a
banana peel in your lobby waiting area and then Sue's you and wins. if you start
building your own company as an individual and not as an LLC and you get
sued for whatever, and you lose well you could lose everything you own.
that is the lawyers will come after your house your car your poodle your signed
Mila Kunis photograph collection, and legally well they'll be entitled to take
all of it. if you have existed under the legal structure of an LLC however, well [legal structures pictured]
the most you can be liable for is the assets of the business itself. yes
they'll take the company computer the remaining 17 months of lease on the
company building, and all your staplers and posted thingies but legally they
won't be able to go after your home your car your poodle or your autograph
collection. Mila is safe whew. so LLC's are a good thing they cost only a few
hundred bucks to set up these days, hi LegalZoom. so before you start up a lava
lamp company of your own think about setting up an LLC first. Mila and your [lava lamps in a row]
poodle gregory will thank you for it.
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