There are two primary processes associated with the broader goal of asset protection. The first involves legally structuring a company in a specific way in order to better ensure that owners, members and/or shareholders may benefit from a personal asset liability shield in the event that a company incurs losses, fails to pay its debts and/or is held liable for corporate wrongdoing.
The second process involves utilizing various legal tools in order to provide either individuals or businesses personal asset protection from legal judgments and/or creditors. This process is broader in scope and may take place after a business has been formally structured, in the event that a business (as opposed to an individual) wishes to strengthen its legal claims to asset protection. It is worth noting that fraudulent behavior such as tax evasion and perjury are not considered legitimate forms of the broader asset protection process.
Two out of the four major business structure types lend themselves well automatically to the goal of asset protection. Sole proprietorships and partnerships are not formed with an automatic asset protection shield in place. In order for owners of these kinds of businesses to achieve this broader goal, they will need to speak with an attorney about alternative legal tools that may help to enable them to achieve this end.
Both limited liability companies and corporations allow for personal asset protection as a feature of their very structures. Corporations are distinct legal entities, so their liabilities cannot extend to their management or shareholders. Similarly, LLC members are legally distinct from their companies as well. It is ultimately very difficult to reach the personal assets of an individual when a court or a creditor is seeking to hold a legally distinct business financially liable for something. With that said, it is important to avoid personally guaranteeing debts and to meet all business compliance standards or your business-related personal liability shield may become compromised.
Broader Asset Protection Processes
There is no single set of strict requirements which allow individuals, sole proprietorships and partnerships (and even LLCs and corporations) to achieve broader asset protection. There are numerous legal tools and tips that may be employed in order to better ensure that personal assets are safeguarded. However, because these tools and tips vary so widely due to differences in legal circumstances, it is generally a good idea for any individual or company interested in this broader goal to consult with an attorney and explore relevant available options. As there are few hard and fast rules employed in this process, interested individuals and businesses may be directed to any number of resources and opportunities as a result of their efforts.
Liability Protection Assistance Is Available
If you are interested in legally structuring a new business or startup in order to better ensure personal asset protection requirements are met or if you are interested in broader asset protections post-formation, please reach out to LawTrades today. We have aided thousands of new and established businesses in better ensuring that their asset protection safeguards are secure. We believe that launching a business shouldn’t have to mean tethering your personal assets to the fate of your company. And our approach is affordable, so businesses of any size may benefit from our services. Please consider reaching out to the experienced, efficient and effective legal team at LawTrades for all of your company’s legal needs.