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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