When forming your business, your business formation attorney will help you decide which business entity works best for your needs. He or she will help you review taxation information, levels of liability, and any risks involved. One important aspect to discuss with your attorney is a business entity’s potential for asset protection.
Why protect your business?
Depending on your business formation, you may start a company whose assets could be at risk in the event of a lawsuit. Whether it is a past customer or client, a competing firm, or a representative of the government, it is necessary to protect your business as an individual or a company. Some tried and true methods can allow your company to protect assets and minimize any repossession from creditors.
Start early
Don’t wait until your company is the target of a lawsuit to make the move and explore options for protecting your assets. Speak with a business formation attorney before anything happens; it is more difficult to take protective measures when already under the threat of a lawsuit. He or she can also advise you on how to best comply with all applicable fraudulent transfer laws, to avoid further problems.
Protecting assets from creditors
- Forming a limited partnership (LP) or limited liability company (LLC) can provide your business with separate place for assets, which will prove difficult for creditors to touch.
- Sometimes, companies participate in “equity stripping,” the term for when a company loans out its own loan collateral. Placing equity in an asset protection trust will protect it from creditors.
- A corporation might sell its own assets to another business operated by the same owners, which is another method of keeping assets off the creditor radar.
Speak with a trusted business formation attorney to ensure that you are fully following the law when working to protect your hard-earned business assets. Contact Ionson Law at (781) 674-2562 to discuss your business formation needs.
