Lawsuits are at an all time high. Over 80 million lawsuits per year! The economy is not helping. 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!
Do not fall prey to thinking; no one has sued me yet, so why do I need to take these extra steps? My question for you is simple. What is your current risk tolerance given your age and net worth? Can you afford to start over? I know many have since 2008.
Keep in mind, simple vs. asset protection is inversely related. Meaning, those who are successful, rarely have all their assets in one legal entity. Why? If that entity were to be sued they could lose all the assets in that one entity!
Let us assume you want to protect everything.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. 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. 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.
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 value 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.
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.
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.
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 then 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.
Scott Letourneau is the founder and CEO of Nevada Corporate Planners, Inc. Since 1997 NCP has helped thousands of entrepreneurs in all 50 states establish the correct foundation & keep the IRS off their back as they incorporate with confidence and get their business off to a fast start to profits. Go to http://www.nvinc.com for free training on what entity and state is best for your business.