Endeavoring to earn a good living is job one when you are a self-supporting adult who is trying to build financial security. At the same time, in the litigious society that we live in, you have to be concerned about protecting what you have earned, because lawsuits are not uncommon.
Asset protection is something that you should think about, regardless of what you do for a living. However, there are people who are engaged in certain lines of work who are more vulnerable to legal actions than others.
For example, consider the plight of the real estate investor. If you own property that is rented out, a steady stream of people will occupy the property. This is true for residential rentals, but commercial rentals can have a great deal of foot traffic on a daily basis.
It would not be shocking if someone was to get injured on rental property if you are the owner of a shopping center or an apartment complex.
Doctors are also in harm’s way when it comes to legal actions. Clearly, people who don’t mind filing lawsuits are going to look for potential targets who have something to go after. Physicians are often affluent, and they are always vulnerable to malpractice suits.
These are a couple of examples, but various different types of business owners may want to prioritize asset protection. If you take the right steps, you can separate your own personal property from the actions of your business from a legal standpoint.
In this blog post, we will look at two asset protection structures that are often used by business people who are looking for personal financial security.
Limited Liability Companies
Many people use limited liability companies when they are structuring their businesses. If you make your business a limited liability company, your personal assets would not be available to litigants if the business itself was sued.
However, you do have to be aware of fraudulent conveyances if you are establishing a limited liability company. You would be breaking the law if you were to establish a limited liability company after you were already aware of the fact that legal actions were being initiated against you.
This is just a thumbnail sketch. If you would like to dig into some of the details about the value of limited liability companies, we have a very valuable resource that you can access through this website.
Our firm has prepared an in-depth special report on limited liability companies, and it is highly informative, but it is also written in a very understandable manner. There is no charge to download the report, and you can get your copy if you click this link and follow the simple instructions.
Family Limited Partnerships
There is another asset protection tool that many people utilize called a family limited partnership. If you establish a family limited partnership, you would act as the general partner. As the general partner, you would have all of the decision-making authority.
You would name family members to act as limited partners, and they would have no say in the actions of the partnership.
Let’s say that you own investment property. You could convey an apartment building that you own into the family limited partnership. If any of the partners were personally sued, the apartment building could not be attached by litigants. On the other side of the coin, if someone was injured in the apartment building, the litigant could not go after the personal assets of the partners.
High net worth individuals can be exposed to estate taxes. There is a federal estate tax, and in the state of Connecticut where we practice law, there is also a state-level estate tax. Family limited partnerships can provide asset protection, but transfers between partners can potentially be made at a transfer tax discount, and this is another advantage.
In addition to the report that we have prepared on limited liability companies, we also have a comprehensive, in-depth report on family limited partnerships. If you digest the information that is contained within both reports, you can compare both options when you are devising an asset protection strategy.
To get your copy of the report, visit this page: Free Report on Family Limited Partnerships.
Take the Next Step
If you have done enough reading and you know that you are ready to discuss your asset protection needs with a licensed professional, we are here to help. To set up a free consultation, call us at 860-548-1000 or send us a message through our contact page.