Are you debating about having asset protection? It’s time to get serious about protecting yourself and your small business.
Let’s take a look at what happens if you don’t have protection.
Every year, small businesses pay $35.6 billion out of pocket in litigation claims. Small businesses have been sued for negligence, discrimination, and accidents – just to name a few.
Claims can be either internal or external. Internal claims are limited to assets of the corporation. External claims go beyond the corporation, and extend into your personal assets.
Do you really want everything you worked for gone because you didn’t consider the right type of protection?
Types of Asset Protection
Now that you know why your business needs protection, it’s important to know the different types. They are:
- S Corporations
- General Partnership
- Limited Partnership
The easiest way to know what type of asset protection you need is to consult with a lawyer. Before heading into your consultation, it’s a good idea to have a basic understanding of the various protection types.
A Brief Explanation of Asset Types
Forming a business organization as a corporation limits the liability provided to its principles. The corporation may be responsible, but only the assets of the corporation can be seized or claimed. These include:
- C Corporations
- S Corporations
- Limited Liability Companies (LLCs)
A limited partnership has at least one general partner and one limited partner.
The limited partner has no personal liability, but very little control over the day-to-day operations. The general partner has personal liability and handles the management of the affairs in the partnership.
A trust is an agreement between a trustor and a trustee.
The trustor creates the trust and the trustee manages all of the assets. The two types of trusts are irrevocable and revocable. The irrevocable trust is a better protection tool.
This is because you can’t be sued for things you don’t control or own.
How to Select the Right Protection
Incorporating your business is the first step to protecting yourself and your personal assets.
The limited liability company is one of the most popular options when it comes to protecting yourself and the company. The pros of an LLC include:
- Less expensive
Some states or entities are not able to be protected by an LLC. This is where a Family Limited Partnership (FLP) or trust would be beneficial. These options will not shield all of your personal assets, but it will protect most of them.
What about a General Partnership?
While this is an option, it is not a good one. You are responsible for all the acts of your partner, whether you know what they are doing or not. This adds a lot of liability.
Make Sure You Have the Right Protection
The most effective asset protection is a corporation or an LLC, with the latter being the most popular.
Protecting yourself and business should be done legally and with the aid of an attorney. Call the law office of Eric H. Light P.A. to start developing a plan that works for you.