Building your assets take some time, even years and decades to earn, yet it just takes a blink of an eye to lose everything. Bankruptcy, being sued, and losing everything is what businessmen (particularly in the obstetrical field) fear the most. We will never know what might happen tomorrow and preparation is an important task that we must consider. Losing your hard-earned money can also lead you to lose your mind because it is a nightmare that everyone is afraid of.
Earning and gaining profit is important, however, protecting your current assets endures as much burden for anyone at any point in their lives. People just concentrate with the fact of earning more, but they forget that they also need to protect the current wealth that they have.
Now, what can you do to make sure that you have every capacity to protect your assets? Of course, there are plenty of options available if you just know how to dig in the right data. With the increasing problems that arose during the pandemic, many people who were careless with their finance and assets are in enormous trouble. Here are some ways that you can do to protect your assets.
1. Separate Your Assets
More often than not, business properties are the ones that are most hit when it comes to lawsuits? It is quite challenging to protect them entirely because they are exposed. However, you can keep your private wealth safe by separating it from your business or company.
The best place to start is the bank accounts, especially if you own a sole proprietorship business. Usually, distinguishing the two is done for the sake of accounting, but it also has legal benefits. Also, try to draw a line between your assets and that of another person, such as a family member.
For example, you and your spouse have a joint bank account. The money here is shared 50/50 between the two of you. So, in case of a divorce, this could be a huge problem. Of course, everyone would like to have a long-lasting marriage, that’s why no one can dispute the idea of joining accounts. However, if you feel–for whatever reason–that the unthinkable could happen, then, it is best to be proactive. Find the best asset protection company and employ its services.
2. Transfer Ownership of Your Assets
This is the idea of having nothing but controlling everything. It is only reasonable that no one can take something away from you if you legally have nothing. So, how do you do it? The first option is to sign up with a company who specializes in this field. Cook Islands asset protection, for instance, will ensure that your wealth will not be at risk in case of a lawsuit.
Alternatively, you can place the assets in your spouse’s name. Of course, this requires a lot of trust between the two of you. In case of a divorce, there could be severe implications in the division of wealth if care is not taken. So, it is up to you to weigh the situation and see which option works best for you.
3. Operate Your Business as an LLC Or A Cooperation
As a sole proprietor, your private assets are exposed. Most of the time, they are attached to the business. To avoid such a scenario, it is best to operate your business as a limited liability company (LLC) or a partnership. What this does is that it makes it easier for you to separate your private and business properties.
As such, in case of a lawsuit, it is way more challenging for the creditors to bring your wealth into the picture. So, what’s the difference between a corporation and an LLC? Well, the two are, more or less, the same, but have a few differences when it comes to the law. If the creditor is awarded a charging order against your portion of an LLC, all your distribution out of the company will go to the creditor. However, they cannot force you to make a distribution, and that may encourage settling of the case for the one holding the charging order may end up getting no money despite having access to the tax bill.
4. Engage In Proper Contracts
Using fraudulent procedures gives creditors a leeway into your private properties. It is the easiest way for them to attack you and your business, and there’s little you can do when it gets to this stage. The best solution is to avoid contracts signed under the table.
Ensure that every project goes through the required preparation channels before they are launched. Also, make it a habit to employ licensed professionals. They may include repairmen, legal contractors, and tax advisors. These people should also–if possible–be insured to avoid any legal repercussions.
5. Take the “Umbrella Insurance” Route
Umbrella insurance is a personal or business insurance that covers all the other insurance services you may have. It will only cost you between $300 and $500 annually to cover assets of up to $2 million. Of course, you must be on the right side of the law to receive their assistance. So, if you find yourself in scandals involving fraudulent practices or negligent actions, then, it might be tough to rely on umbrella insurance companies.
One significant disadvantage of this option is the fact that it offers up to $2 million coverage. Some entrepreneurs, however, may require protection of assets worth more than that. As such, it could be challenging for them to secure their wealth using this route.
Protecting your assets is something that you should consider right from the start. Do not wait for a lawsuit for you to react. There are several ways to be proactive in asset protection. However, as discussed above, some of the options can be risky and could put you into more trouble if you’re not careful. Therefore, you need to consider all the possibilities before your preference.