The Ultimate Business and Asset Protection Structure to Protect Your Net Worth.

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Here is the problem: Lawsuits are at an all-time high. Over 80 million lawsuits per year!  The more that people struggle the more they are concocting ways to extract your wealth from you. Perhaps you may not feel you have a lot of wealth, but to others, you may appear rich. Your insurance policies are like blood in the
water that the sharks can smell from a mile away!

Don’t fall prey to thinking; no one has sued me yet, so why do I need to take these extra steps? My question to you is simple. What is your current risk tolerance given your age and net worth? Can you afford to
start over? I have know many have had to do that since 2008.

Keep in mind, simple vs. asset protection is inversely related. Meaning, those are successful, rarely have all their assets in one legal entity. Why? If that entity were to be sued you could lose all the assets in that one entity! Perhaps you will be protected personally, but your business may be gone.

Let’s assume, you are thinking, “Ok, Scott…I want to protect everything, how do I do that”? Let’s take a look at what that structure would look like.

  1. A separate legal entity for your main operating business. That may be a corporation or LLC.
  2. Another separate legal entity to separate your business into two parts. If you are brand new this is not
    necessary. But if you have been in business for 20 years in one legal entity, that means one lawsuit could cause 20 years of business to go down the tubes. You may want to split up your product lines or services. If you do seminars that may be a different entity from your information product business.
  3. If you have a business with partners and operate through LLCs, each partner should own their
    membership interest in their own LLC, not individually. Why? The LLC has the charging order protection that makes it more difficult for someone to come after the owner of the LLC, which is great. When you have partners, even with the charging order, you do not want any disruptions if the owner is sued for something unrelated to the operating entity. A second layer LLC will prevent that from happening.
  4. A separate legal entity for each piece of real estate you own (your primary residence will be a different
    approach). If you own rentals in Wisconsin where you can buy a house for $40K, you may not need a separate LLC for each piece of real estate. In California, the same house may be $930K. In that case, a separate LLC may make sense. California has an $800 per year franchise tax fee so you may consolidate based upon that fee.
  5. A separate LLC for your safe assets. That includes investments in the market, gold, silver, ownership in other
    companies (like any C corporations). Any entity taxed as an S corporation, there are limits on who may be the
    shareholder, only a single member LLC can be a shareholder. NEVER have your safe asset LLC be the
    owner of a risk asset, like real estate or a business.
  6. A separate LLC for your domain names. Domain names are virtual real estate free and clear. They may become quite valuable over time. If owned by your main operating company and that is sued, you could lose control of your most valuable asset.
  7. A personal residence trust for your home. If you have equity that is not covered by your state homestead laws, this may be the best option to protect your equity and not have the negative consequence that placing your residence in an entity would entail. Attorney Rob Bolick is a great resource and referral partner with NCP and covers more details about the personal residence trust.
  8. A life insurance trust for your life insurance policies. This is part of the estate planning for your estate. Life insurance is not subject to income taxes but is subject to estate taxes and that is why the life insurance trust is a must. Attorney Rob Bolick, an attorney in Las Vegas would be a great resource for this also. His number at his law firm is 702-870-6060.
  9. A Nevada Asset Protection Trust. This is like having an offshore trust onshore. It would be the owner of your LLCs and the living trust would be the beneficiary of the Nevada Asset Protection Trust. Nevada has a two-year statute of limitations and when two years go by you are home free from almost all creditors. Attorney Rob Bolick is the resource for this also.
  10. A living trust. Estate planning is very important and most Americans do not have a living trust established. This will help pass your assets to your heirs and avoid probate when properly funded.
  11. An offshore entity. This is the top asset protection tool because the entity is in another country with different rules than the U.S. There are NO tax benefits to an offshore entity. The U.S. person would need to pay all taxes associated with it. The IRS is all over this type of entity, so again, just to be clear, you must pay all taxes as a U.S. citizen.

Other keys point to consider:

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Multi-Tiered Structuring Strategies for Maximum Asset Protection

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One of the biggest mistakes I have found over the past 20 years is clients who sometimes have that false sense of security thinking they are totally protected with one legal entity.

Unfortunately, I have seen clients lose control of their companies, their personal assets, and even control of their operating business. The goal is to give you the strategies to plug up any gaping holes you may have in your shield of protection to your current and future assets.

Let’s review the basic’s. The first step is to separate your personal and business assets. That means not operating as a sole proprietorship and forming a separate legal entity like an LLC. Nevada offers an extra layer of protection when it comes to protecting the entity veil and making it harder for someone to come through to your personal assets (assuming you were the owner of the entity).

The next step is to separate your “Safe” from “Risk” assets. Most take the first step to separate their “risk” assets by forming a separate legal entity. Shortly we will cover how to add more separation for your business.

Many forget to form a separate legal entity to protect their “safe” assets, like gold, silver, stock in the stock market (even your cryptocurrency)…where there is no direct liability to you. I believe the reason for this is most think they do not have enough safe assets to protect.

There is no magic number, like once you achieve $100K in safe assets (outside your retirement plan) you need to form a separate LLC. The key question to ask is, “How would you feel if you lost all safe assets to a lawsuit, or action by your creditors?”

If you had $40K of investments unprotected, that may be very important to you, if that is all your safe assets. Also, if you have ownership interest in a business, you may be worth millions, but if you own it personally or by your living trust (which is protected from probate, not liability) you may lose control of that safe asset also!

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Why Your Assets May Not Be Protected…..

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As you know, there are over 80 million lawsuits filed every year in the United States. Frivolous lawsuits alone are said to cost the United States over $200 BILLION annually. Even in this current ecomony, things could turn and go back down.  If money gets tighter will more get desperate? How many entrepreneurs abandon their business, which was there vehicle for financial success, and now look to a much easier approach…like suing you and your business. Does someone look at you as their retirement plan? For many Americans, their only option for retirement is to win the lottery or sue someone. I know, not very uplifting, but conceivably reality. This may be the last wake up call to button up your asset protection plan, tax and bookkeeping, and business credit so you and your family are protected. Unfortunately, one entity is not a catch-all for results. Let me ask you these important questions to show where you may be very vulnerable:

1. Do you still operate a side business as a sole proprietorship? That is like playing Russian Roulette with your financial future.

2. Do you own real estate in your own name (separate from your residence)? Even if do not have any equity, to others you must be rich and a target. That is like walking around with a big sign on your forehead that says, “I own real estate in my own name, check it out online…go ahead and sue me.”

3. Are you relying upon your living trust to protect your assets? They do not protect from liability! Do you have family members or parents that are doing the same? That is an open invitation for someone to take their net worth.

4. Do you own safe assets in your own name (like gold and silver)? Is it enough to protect with a separate legal entity from your operating business? Maybe it is a “small” amount in general. The question you have to ask yourself is how would you feel if you woke up tomorrow and your “small” investment was gone? Now…that maybe a different feeling. Losing 100% of your investments no matter how “small” may be a very big deal to you. It is time to protect them before it is too late!

5. Are you operating a business with a partner as a general partnership on the side? That is a double danger because now your partner could cause you to lose all your assets. Are you waiting to make more money first…remember, you cannot buy homeowners insurance when your house is on fire…and you cannot protect yourself (very well) after you have been sued. If you have $100K in assets and are sued for $100K you cannot form an entity and transfer them to protect them (well you can do anything you want but…) the judge will call that fraudulent conveyance and undo your transaction if your goal was to protect your $100K because of the $100K lawsuit. If you had $200K and you did not mind leaving $100K on the table to be taken, that is different…but why be in that position when there is a better way? This is only one threat your business is up against. The other is the IRS (and they are hurting big time when it comes to collecting tax revenues). Are your records up to date? Do you have any records other than an online checking account balance? That is not a business, but a hobby according to the IRS. Finally, is your business financially naked?

How much revenue are you losing on a daily, weekly, or monthly basis? Read the article on how to position your business so you are not financially naked and have an opportunity for success!

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Are ALL Your Assets Protected Properly Going into 2016?

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As the end of another year comes to a close and you are getting ready for your plans for 2016 you may be evaluating are all your assets
properly protected?

lawsuit form with filler and book

Here are many of the common strategies that often turn into costly mistakes (that you may not have considered):

1. All your business ventures in one business. Yes, if you are just starting and testing 3-4 different revenue streams that may be ok in
one entity but if two or three are really taking off, why put all of that in one business entity (other than it is easier). Would you put
all your investments in one stock? Probably not. Why? Too much risk. The same strategy applies to a business (don’t put all your eggs in
one basket).

2. Real estate in your own name (outside your principal residence) even without equity may be a lighting rod for lawsuits, best in a separate
entity. Too much equity from real estate in one LLC.

3. Business with a partner that is in the same entity as your operating business that you own 100%. At the end of the day you make your
partner owner of your main company which may not be what you intended.

4. Holding safe assets or investments outside your retirement plan in your own name/brokerage account or your living trust (remember your
living trust provides ZERO liability protection but protection from probate taxes).

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You have an 87% Chance of Forming the WRONG ENTITY…

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Which entity type gives you the BEST protection for your business and personal assets? Which one helps you pay the lowest legal taxes now and later? Here are the most common options:

1. Sole Proprietorship

2. C Corporation

3. S Corporation

4. Limited Partnership

5. LLC Taxed as a disregarded entity

6. LLC Taxed as an S corporation

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