We live in a litigious society. If we haven’t been sued, we certainly know someone in our business community who has been sued, often with disastrous results. This section covers the easy things to do that might help protect you if the worst happens.
Have a plan
The first step we always suggest to our business owners is that they first sit down and figure out what are the largest risks facing their business. We then suggest that they craft a disaster plan on what they would do if any of these items happens.
Being proactive is where the plan is ready before the event happens. Then there is a better than even chance that you will come out of the event whole. If you don’t have a plan, then you are not only dealing with the problem, but you are also trying to figure out what to do on the fly. This is where mistakes happen.
We suggest that as you assemble this plan you include your accountant, your lawyer, your insurance agents and key managers of your company. All have different viewpoints and information you will need in assembling your plan.
Use corporate and asset protection structures
In high risk businesses or high risk parts of the country you will want to have multiple corporations that protect various parts of your business.
If you are in a business where professional liability is not protected by a corporation, you should work with an asset protection specialist who will help you structure the ownership of your assets in a manner where it will be tougher for creditors to get you and your assets if the worst should happen.
We often suggest that contracts should be owned by one corporation and hard assets should be owned by another corporation. For example, if you are a construction company, the equipment you use is owned by one company. This company would lease the use of those assets to your operating company. This would protect the hard assets, or at least make it more difficult for creditors to attach those assets.
You must plan early
There is a term in the asset protection world – fraudulent conveyance. You don’t want to be caught by this concept. Simply stated it means that if you transfer assets knowing that a law suit is going to happen, you will have those assets drawn back into any settlement.
For this reason, you must plan early if you expect to protect your assets from creditors. The name of the game in asset protection is often making it difficult and expensive for your creditors to prevail. You might end up paying some money, but that money will likely be less than if you had done no planning.
Selected Tools:
Shareholders Agreements
Domestic Asset Protection
International Asset Protection
The above tools, techniques and resources are listed as examples. Your Stage2 Advisor will work with you to identify the right strategies for you depending on your specific life goals and financial goals.