You work hard to provide for your family—a nice home, college savings account, investments for retirement, an inheritance to leave your children—and finding a way to protect those assets is always important; but in today’s economic climate asset protection is more important than ever, for individuals and business owners alike.
According to a recent article in the Robb Report, “A lot of business owners are currently being pursued by creditors… They borrowed money during the boom to finance projects, but now find themselves upside down on their loans, so the banks can come after them for the personal guarantees that they made or for the deficiency amounts. These people have not only lost the value of their real estate investments, many are facing the possibility of losing their homes and savings.”
Fortunately, when it comes to protecting your assets, you have a number of different options available to you. One of the most reliable options for asset protection continues to be a Limited Liability Company (or LLC); a business entity with unincorporated status, blending certain benefits of business partnerships and corporate structures. LLCs can be created with family members serving as the partner(s), which has the effect of keeping your assets in the family circle, but out of reach of lawsuits or creditors who might go after your personal wealth.
Aside from the protection they offer from predators, LLCs are an appealing asset protection tool because they offer plenty of flexibility to the owners. Our office has extensive experience helping clients create LLCs for asset protection purposes, and many clients prefer to have LLCs created under the jurisdiction of states with laws friendlier to business entities than California laws. For example:
* Wyoming has always been a popular state for business entities because it has no income tax, inheritance tax, gift tax, franchise tax, excise tax, business or occupation tax.
* Nevada offers many benefits to businesses due to their “pro-business climate, low-tax mentality and the lack of an information sharing agreement with the IRS.”
* Delaware is another popular state for the formation of business entities because of their business-oriented court system and body of law.
A number of our clients have benefited by having their personal and business assets completely out of reach in these out-of-state LLCs when they found themselves entangled in a California lawsuit. There can be additional tax benefits to forming LLCs in one of these states as well, although this is usually not the primary reason to take your company out of state.
You do not have to reside in any of these states to form your business entity under their jurisdiction, but you will have to be careful to adhere to the requirements for an out-of-state LLC. Our office has assisted a number of clients in creating and maintaining out-of-state entities for asset protection purposes. We would be pleased to help you determine which asset protection strategy would work best for you and your family or business. Contact our office today.