How Can I Protect My Assets As a Small Business Owner in North Carolina?
May 31st, 2022 in Business Planning and Professional Practice
Small Business Protection
Small businesses make up over 90% of all businesses in the United States. This is nearly 30.2 million establishments, employing 47.5% of the country’s workforce. This is why Small Business Protection is so important.
What’s more, opening your own venture in the United States takes as little as six days. So, if entrepreneurship has always been your dream, you can take advantage of the ease of starting a business.
Unfortunately, small businesses have increasingly become the targets of lawsuits. With this trend of small businesses losing billions of hard-earned investments every year through tort costs, it’s imperative to work closely with a Raleigh estate planning attorney who can help protect your assets.
Is the Legal Structure of My Business Critical in Asset Protection?
Most small business people run it as the general partner, independent contractor, or sole proprietor. Operating in such capacities ties your personal assets with that of your business. Thus, your business creditors can recover business debts from your personal savings, bank account, or your house. Similarly, in partnerships, a creditor can seek full restitution from either you or your partner.
The best way to avoid claimants or creditors from touching your personal assets is to form an LLC or incorporate your business. And you can do this even if you are the only owner in the business. You will need to pay a state fee for this, among other annual costs, but it will be worth it. Consult with an asset protection attorney in Raleigh to learn more about your options.
Can Retirement Plans Protect My Assets and Offer Small Business Protection?
Not all retirement plans are effective in protecting your assets as a small business owner. For instance, the asset protection features in an IRA plan are not guaranteed in all cases because it is ruled under a different Internal Revenue Code section. On the other hand, the asset protection features on ERISA qualified retirement plans are protective and shield the funds from personal and corporate creditors.
The federal laws forbid the court from assigning ERISA benefits in bankruptcy situations. The transfer of ERISA funds is restricted and cannot be part of the bankruptcy estate that creditors benefit from when you file for bankruptcy. Note that you will have to report with the participants of the plan and do annual filings with the Department of Labor. This may be a little complicated and that’s why you need an asset protection attorney in Raleigh.
Do Small Business Owners Need to Insure Everything?
Investing in insurance is another great way to protect your assets and enjoy peace of mind while running your business. You simply have to make sure that you choose the right type of insurance that offers enough coverage. Remember that you are normally covered to the limit of your policy, and you must think critically and consult with an expert before deciding on this.
Consider taking up a business owner’s policy (BOP) or malpractice coverage if you are a professional. On top of the existing coverage, you can also take up an umbrella policy for added protection. This ensures that your business will not have to part with a large sum of money that can cripple its operations. For example, the insurance company can cater to an employee’s compensation if they are injured at work.
Is Spreading My Wealth a Good Idea?
Spreading your assets to trusted members of your family to protect them in any eventuality is a good idea, but the timing is very critical. The transfer has to happen before you become subject to any claims. If you transfer property or funds when a tort has been brought against you, the court might cancel the transfers and allow the creditors to take the money or sell the property.
So, if it is not too late, consider being generous to your kids and spouse. If you go bankrupt or are sued for unpaid debts, only assets under your name can be involved in the saga. Therefore, most of your assets will be registered under your loved one’s names and will be safe from creditors. An asset protection attorney in Raleigh can assist you with proper estate planning today.
How Can I Use More Than One Entity to Safeguard My Assets?
Doing your business operations with two or more business entities can protect the assets of your business from creditors. You can do this by creating an operating company and a holding company. The holding company usually owns all the assets, whereas the operating entity uses the assets without owning them.
The way it works is simple and straightforward. The holding company:
- Holds a majority of the assets
- Leases assets such as equipment, warehouses, land, and vehicles to the operating company
- Lends money to the operating company for the purchase of assets and is secured by a lien on those assets
- Conducts limited business activity
- Is not liable for money owed in the operating entity
- Has almost no exposure to liability
The operating company, on the other hand:
- Conducts all business activities
- Is exposed to the biggest risk of loss to creditors
- Contains a limited amount of assets
While this is an excellent way for small business owners to limit liability on their assets, it is essential to do it the proper way. Proper titling and business formalities need to be followed when implementing this strategy. Otherwise, creditors can defeat it and end up accessing what you were seeking to protect in the first place. That’s why you need the assistance of your Raleigh asset protection attorney.
A Legal Team Helping Families and Businesses Plan Better
Everything you have put the work to build deserves to be protected in all ways. Forget about the idea of moving your assets offshore since the strict reporting of foreign assets is never favorable. There are legal ways to do it in North Carolina.
The best route towards asset protection is through working with knowledgeable professionals. With good business planning advice, you might not make costly mistakes. Call (919) 900 4720 for a free strategy session with an experienced North Carolina asset protection lawyer.
