3 Tell-Tale Signs Your Business Needs Asset Protection.

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Owning and operating a business can either be the greatest blessing you’ll ever receive or your instant downfall. Sure, you have plenty of revenue sources that’ll contribute to your net worth, but it can also serve as a constant target on your back. Debts, mortgages, professional liabilities, and lawsuits will follow you everywhere you go.

Asset protection will help deter these potential risks and safeguard your wealth from internal and external threats. There are two types of assets—dangerous assets, which carry the substantial risk of turning into liabilities, and safe assets. Dangerous assets include commercial property, business assets, rental real estate, while safe assets include bonds, stocks and individually owned accounts. So, why should a business seek protection for their assets?

Whether you’re from the real estate industry or telecommunications or even a working individual, everyone is susceptible to lawsuits and liabilities. It’s true that the best offense is most often the best defense. Even before encountering potential liabilities, one must employ a plan that’ll safeguard your business assets. 

Asset protection planning is all about starting early even before the crises arise. In gambling, this moment is when you’re taking your bets off the table while you’re still winning. Otherwise, active creditors may attack you with ‘fraudulent transfer.’ This worst-case scenario will burden you, the debtor, more than if you had done nothing. Also, both the debtor and whoever provided assistance in the fraudulent transfer can be liable for the creditor’s attorney’s fees. As the cherry on top, you could also lose the chance of getting a discharge in bankruptcy. Planning late will certainly backfire on you. 

Thus, before entering any sort of agreement or contract—like business contracts, real estate transactions or loan agreements—you should’ve already taken protective measure to avoid potential liabilities. Do you need help avoiding potential lawsuits and active creditors? You can learn more from  https://blakeharrislaw.com/asset-protection/cook-islands-trust  and other online resources on asset protection.

Failure to separate your business assets from your personal ones is like a beacon to active creditors. Creditors are people who try to levy from your assets, whether business or personal, by taking you to court to try to recover any claims they may have. For them, business assets owned by the same legal entity is like hitting two birds with one stone—or multiple birds depending on the quantity of your assets. 

The core management of business should be separated by its operations, in terms of ownership. This kind of set-up is susceptible to lawsuits due to the mere fact that creditors can levy from it. Thus, when a lawsuit occurs, one can employ different types of asset protection devices, such as using different legal entities.

A C-corporation or C-corp is a legal entity that’s separately taxed separately from its shareholders or owner. An S-Corporation or an S subchapter is a type of corporation that needs to meet specific requirements to IRS. If it does, it can pass income directly to the owner or shareholders without the burden of paying federal corporate taxes. Here are some of the benefits of establishing a corporation:

If your business incurred excessive debts, you might be worried about whether a creditor can levy from your personal assets like your own bank account, your car, or even foreclose your house to pay off the debts. How will asset protection help you mitigate the damages? It depends on what type of debt your business incurred. 

There are two types of debts – secured and unsecured. Secured debts – such as loans – means you agree to use your property or personal assets as payment if you default. Business asset protection can’t do much about this kind of debt since you already agreed to use your property as collateral.  

As for unsecured debts like credit cards, business asset protection will help you not to be personally liable for paying your business debts.  Most credit card companies need a personal guarantee clause in their applications. If you decided to sign for a business credit card, you – as the business owner – and the business handles paying the credit card charges. If your business failed to pay, you’re required to. But having corporate credit cards can save you from this situation, as applications for this type of credit card don’t involve a personal guarantee. 

Final Thoughts

Every coin has two sides, just like having a business can have both advantages and drawbacks. With your hard-earned accumulated wealth, it’s up to you to safeguard it from vultures who try to prey on it. Start creating and implementing asset protection plans early to avoid being a target. Employ different strategies and measures that fit the specific needs of your business. 

Of course, the type of asset protection strategy that you need still depends a case-to-case basis. Seeking professional legal counsel is a great first step if you want to start securing your business now. 

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