A new lawsuit is filed every 30-seconds, and 16 million lawsuits are filed in the U.S. each year. It is clearly a Wild world out there, but there are ways that you can protect your assets from your not-so-friendly next door lawsuit opportunist. You are an especially viable target if you have something worth taking. There is no need to be alarmed, just prepared! An LLC or LLP can be your ultimate armor in protecting yourself from such lawsuits.
An LLC & LLP allows you to use and control an asset, yet you will not own the asset in your name. Rather, it will be owned by the LLC or LLP. Therefore, by separating your assets into several LLC’s, you are safeguarding them from being pulled into a lawsuit brought against you (or one another), as they are owned by the LLC.
An LLC is a “Limited Liability Company.” It provides the desirable liability features of a corporation, without all of the extra hassle (paperwork, etc.). Lets say you have a boat. So you give it a clever and punning name, and put it in an LLC. A judgment against you is not valid against the LLC and the asset it holds (the boat). Furthermore, lets say you have an investment property (a high risk lawsuit property), and tenants injure themselves on the property, and commence a lawsuit. They can only sue the LLC. Your home and other assets (bank account, etc.) may not be touched, because you do not own the property, thus you are not personally liable. It is like being a stockholder in a corporation.
Due to the fact that there are several requirements to properly forming an LLC, you may want to seek an attorney (that has a thorough understanding of asset protection) to assist you in ensuring that the LLC is valid; otherwise, your safeguarding efforts will be futile. Also, keep in mind that the timing of the asset transfer cannot be done to actively avoid a present creditor, as it may be considered a “fraudulent conveyance.” Therefore, it is important to partake in these asset protection strategies prior to any legal or financial problems. The early bird gets the worm!
Enjoy the fruit of your labor, but don’t own it; control it!