Protecting your assets is a necessity because they could be lost in an instant in a lawsuit. Imagine working long and hard to earn your wealth just to lose them in a claim. There’s no saying when, where, or how you could lose your assets, but you can take control and prevent it from happening.
Cantley Dietrich, a law firm in Atlanta, shares that basic prenuptial agreement and multi-tiered LLC structures are just of the ways to protect your assets.
Here’s how you can strategize asset protection as permitted by law.
Use a Business Entity
You can never tell what a simple business dispute could do to your assets. The worst case scenario is that it could cost you everything you own. As such, it’s vital to plan protection even before you begin operations, which means choosing an appropriate business entity.
The right business structure can limit your liability, insulating your company as well as your personal assets from creditor claims or lawsuits.
Here are common business entities:
- Sole Proprietorships provide no limit on personal liability. The big downside, however, is one mistake could cost you your home; this would depend on state laws.
- General Partnerships can affect you even if you have nothing to do with a particular dispute your partner is involved in. Your partner’s actions, whether personal or company-related, could leave you hanging by a thread. Creditors and other individuals pursuing any claim might still come after you because of your partner’s actions.
- Corporations offer sufficient asset protection for owners because of the limited liability they afford to directors, officers, and shareholders. Creditors can also only come after the corporation’s assets. There is, however, an exception for personal services. Professionals who form a corporation and work for it as an employee, for example, can be held liable for damages.
Knowing how each business entity could affect your assets in the event of a lawsuit can prepare you for disputes or lawsuits.
Owning Insurance Could Help
You may be more exposed to liability than others, depending on your profession. For instance, real estate agents and financial advisors are professions that could be vulnerable to lawsuits for malpractice. You can protect your assets by paying your errors and omissions insurance coverage.
For full coverage, you can also opt for extra or expanded coverage, such as the following:
Homeowners insurance provides the coverage you need in case someone is hurt on your property. Select a deductible that matches your savings and ensures adequate coverage.
Auto insurance is the additional coverage you need for yourself. The minimum legal liability coverage isn’t enough because it only covers the damage and injuries of the other party.
Umbrella coverage is the backup insurance you can use if your insurance falls short. It pays benefits up to the limit of the policy once you have exhausted all your liability coverage.
These kinds of insurance can provide the asset protection you need. Be smart and think ahead when it comes to your wealth; they need all the protection they can get.