Asset Protection
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I will be doing this too sometime. So far my business exists only as a number, but I will have to do this eventually.
_________________________ Asu no koto o ieba, tenjo de nezumi ga warau. Talk about things of tomorrow and the mice in the ceiling laugh. (Japanese Proverb)
If I could offer some advice, I'd say do it before you get to into it. The fact that I have several real estate investments and a partnership in a car wash really complicated things. But, its pretty neat saying "I own nothing"
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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Not the digital kind :) Last year, a business associate was recently taken to the cleaners b/c she was acting as a sole proprietor in her business. She failed to perform on a deal and rather than just fair restitution, judgments were placed on all of her personal and business assets. Pretty sad and scary at the same time. After seeing this, I called my attorney and wanted to make sure that something like this could never happen to my family. So, I am just about to finish the last of paperwork regarding protecting my personal assets from anything that may happen in my businesses and vice versa. I have to say, it's pretty wild. When we are done filing the paperwork with the county, state, Nevada, and two foreign countries I won't "own" anything; not even a checking account. Anybody else done this? I hate going to this extreme but case law really seems like it is over-compensating people for minor damages.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
It's crap like this that makes me feel that Business Law 101 should be a required course for all university students, at least in the U.S.
Jon Sagara Once again, the conservative sandwich-heavy portfolio pays off for the hungry investor! *slurp* Oh, I'm ruined! -- Dr. Zoidberg .NET Blog | Personal Blog | Articles
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Not the digital kind :) Last year, a business associate was recently taken to the cleaners b/c she was acting as a sole proprietor in her business. She failed to perform on a deal and rather than just fair restitution, judgments were placed on all of her personal and business assets. Pretty sad and scary at the same time. After seeing this, I called my attorney and wanted to make sure that something like this could never happen to my family. So, I am just about to finish the last of paperwork regarding protecting my personal assets from anything that may happen in my businesses and vice versa. I have to say, it's pretty wild. When we are done filing the paperwork with the county, state, Nevada, and two foreign countries I won't "own" anything; not even a checking account. Anybody else done this? I hate going to this extreme but case law really seems like it is over-compensating people for minor damages.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
No. That's stupid. I incorporated and I separated my business withholdings from my personal. I purchased $2,000,000 of liability insurance for my business and I made sure that my personal stuff was entirely separate from by business. I had an attorney review everything and he said it was all done right and properly. I had placed a legal barrier to protect my personal life.
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It's crap like this that makes me feel that Business Law 101 should be a required course for all university students, at least in the U.S.
Jon Sagara Once again, the conservative sandwich-heavy portfolio pays off for the hungry investor! *slurp* Oh, I'm ruined! -- Dr. Zoidberg .NET Blog | Personal Blog | Articles
I agree 100%. We also kept telling her she needed to at least move to a LLC but she didn't listen.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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No. That's stupid. I incorporated and I separated my business withholdings from my personal. I purchased $2,000,000 of liability insurance for my business and I made sure that my personal stuff was entirely separate from by business. I had an attorney review everything and he said it was all done right and properly. I had placed a legal barrier to protect my personal life.
code-frog wrote:
I purchased $2,000,000 of liability insurance for my business and I made sure that my personal stuff was entirely separate from by business.
I've had the umbrella liability policy in place even before I started doing business. But, after seeing this happen I took matters to the extreme. Like I said, everything of any value is will soon a different entity's property.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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code-frog wrote:
I purchased $2,000,000 of liability insurance for my business and I made sure that my personal stuff was entirely separate from by business.
I've had the umbrella liability policy in place even before I started doing business. But, after seeing this happen I took matters to the extreme. Like I said, everything of any value is will soon a different entity's property.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
Well I admit that anymore nothing is safe and the people you can trust least are those that pass the judgments so in that regard it's probably best to have no actual value. I guess what gets me curious is if you don't own anything you are going to have a very hard time borrowing anything. So hopefully you never need a loan for your business.
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Well I admit that anymore nothing is safe and the people you can trust least are those that pass the judgments so in that regard it's probably best to have no actual value. I guess what gets me curious is if you don't own anything you are going to have a very hard time borrowing anything. So hopefully you never need a loan for your business.
Ahh this is why I paid an attorney, my business has lots of assets, and pays me a salary, dividends and health care. All of my income goes to accounts owned by a limited family partnership of which I am a bennificiary. It's not the simplest thing but, proof of income is not an issue. Also, this is why stated loans and unsecured lines of credit exist.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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Ahh this is why I paid an attorney, my business has lots of assets, and pays me a salary, dividends and health care. All of my income goes to accounts owned by a limited family partnership of which I am a bennificiary. It's not the simplest thing but, proof of income is not an issue. Also, this is why stated loans and unsecured lines of credit exist.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
Okay, so that's what I did exactly. But I didn't have the obscurity of a family and a beneficiary. I set it up where I'm an employee of my business. I have a separate checking account. I have absolutely separate assets and liabilities and each month I get a paycheck from my corporation which is free standing. It's not attached to me at all really. I'm an employee that gets a pay check for a set amount. My accountant is the one who told me how to do it all. He told how to incorporate, which forms to use and how to have my articles of incorporation prepared so that my personal life is really not connected at all with my business holdings. Right now with the financial PITA we are in from Katie and related stuff I'm having to fix a bunch of things. Mainly as a business I didn't have a credit history so I'm not credit worthy until I had been in business for 3 years. As a result I had to purchase stuff for my business on personal credit or with personal loans, etc... Now I'm actually securing business loans to pay off those personal credit/loans/etc... to further abstract my personal life from my business. The road map for me has been pretty clear and the only real hiccup was no history as a business so no ability to get loans etc... Now that I've been around for 3 years that's not an issue. So my abstraction is pretty much complete. If we were not in such a PITA right now I could do even more but have been advised to go slow. Make changes, wait a bit make a few more changes and let each change simmer so I don't look to shaky to creditors and such. My articles of incorporation and my accountants divestment of my personal holdings from my business have made a very hard line in the sand and from what I can see jumping that line won't be easy especially with the various forms of insurance and other policies I've obtained.
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If I could offer some advice, I'd say do it before you get to into it. The fact that I have several real estate investments and a partnership in a car wash really complicated things. But, its pretty neat saying "I own nothing"
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
Chris Austin wrote:
If I could offer some advice, I'd say do it before you get to into it.
I will per se, but I can't yet. There is going to have to be some fine timing with this. A couple things have to happen first, and then I will jump into that. Probably the business will not start, but the option to may have, so we'll have to see.
_________________________ Asu no koto o ieba, tenjo de nezumi ga warau. Talk about things of tomorrow and the mice in the ceiling laugh. (Japanese Proverb)
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Not the digital kind :) Last year, a business associate was recently taken to the cleaners b/c she was acting as a sole proprietor in her business. She failed to perform on a deal and rather than just fair restitution, judgments were placed on all of her personal and business assets. Pretty sad and scary at the same time. After seeing this, I called my attorney and wanted to make sure that something like this could never happen to my family. So, I am just about to finish the last of paperwork regarding protecting my personal assets from anything that may happen in my businesses and vice versa. I have to say, it's pretty wild. When we are done filing the paperwork with the county, state, Nevada, and two foreign countries I won't "own" anything; not even a checking account. Anybody else done this? I hate going to this extreme but case law really seems like it is over-compensating people for minor damages.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
The other thing that I try to do is get a limitation of liability clause in any agreement I sign. It is not always possible, but often is. I always explain that I have $2 million of liability insurance and I would like a clause that explicitly limits any liability claim to that amount. After the initial uneasy quiet response I argue that this is really responsible risk management on their part, that if there is a way that I can really cause $10 or $20 million damage to them, then they should cover it in some other way as there is no way that they can recover it all from me. How hard you argue depends on your leverage.
Peter "Until the invention of the computer, the machine gun was the device that enabled humans to make the most mistakes in the smallest amount of time."
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Same here. I had my LLCs in place prior to this process but we wanted to take it even further in case the "corporate vail" were ever to be pierced. Now, I am only an employee of my companies :) -- modified at 20:49 Tuesday 21st August, 2007
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
Chris Austin wrote:
we wanted to take it even further in case the "corporate vale" were ever to be pierced. Now, I am only an employee of my companies
Forgive my ignorance - I've only made a cursory examination of the issue.. what is involved in taking things further? I'm curious because I might need to know one day :)
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The other thing that I try to do is get a limitation of liability clause in any agreement I sign. It is not always possible, but often is. I always explain that I have $2 million of liability insurance and I would like a clause that explicitly limits any liability claim to that amount. After the initial uneasy quiet response I argue that this is really responsible risk management on their part, that if there is a way that I can really cause $10 or $20 million damage to them, then they should cover it in some other way as there is no way that they can recover it all from me. How hard you argue depends on your leverage.
Peter "Until the invention of the computer, the machine gun was the device that enabled humans to make the most mistakes in the smallest amount of time."
Very prudent. I attempt to use a similar "sole remedy" clause in every contract.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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Chris Austin wrote:
we wanted to take it even further in case the "corporate vale" were ever to be pierced. Now, I am only an employee of my companies
Forgive my ignorance - I've only made a cursory examination of the issue.. what is involved in taking things further? I'm curious because I might need to know one day :)
A simple answer is that it is a lot of mis-direction or as my attorney likes to say "adding layers to the onion". What it boils down to is using multiple legal structures to hide / remove ownership of assets and companies.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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Very prudent. I attempt to use a similar "sole remedy" clause in every contract.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
And be careful who you work for and what jobs you take on. I once had the Technical Director of one of our large public companies contact me to help assess the usefulness of one of their concrete products for a large airport in Asia. They wanted to know the effect of it on the airport radar and radio navigational aids. An interesting project until his closing comment "and you do have imdemnity insurance don't you, we are currently in the process of suing one of our consultants". Add that to a quick calculation of the damage his concrete building could do to a fully laden jumbo or two, and I never followed up on his call.
Peter "Until the invention of the computer, the machine gun was the device that enabled humans to make the most mistakes in the smallest amount of time."
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And be careful who you work for and what jobs you take on. I once had the Technical Director of one of our large public companies contact me to help assess the usefulness of one of their concrete products for a large airport in Asia. They wanted to know the effect of it on the airport radar and radio navigational aids. An interesting project until his closing comment "and you do have imdemnity insurance don't you, we are currently in the process of suing one of our consultants". Add that to a quick calculation of the damage his concrete building could do to a fully laden jumbo or two, and I never followed up on his call.
Peter "Until the invention of the computer, the machine gun was the device that enabled humans to make the most mistakes in the smallest amount of time."
:) Reminds me of a recent job I turned down. This one involved federal level political campaign management. When it was brought to me, in my minds eye I could see the newspaper headline "Candidate blames software" :laugh:
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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:) Reminds me of a recent job I turned down. This one involved federal level political campaign management. When it was brought to me, in my minds eye I could see the newspaper headline "Candidate blames software" :laugh:
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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A simple answer is that it is a lot of mis-direction or as my attorney likes to say "adding layers to the onion". What it boils down to is using multiple legal structures to hide / remove ownership of assets and companies.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
Sounds like encapsulation or virtualization. Now you're talking a language CPians can understand! :)
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Not the digital kind :) Last year, a business associate was recently taken to the cleaners b/c she was acting as a sole proprietor in her business. She failed to perform on a deal and rather than just fair restitution, judgments were placed on all of her personal and business assets. Pretty sad and scary at the same time. After seeing this, I called my attorney and wanted to make sure that something like this could never happen to my family. So, I am just about to finish the last of paperwork regarding protecting my personal assets from anything that may happen in my businesses and vice versa. I have to say, it's pretty wild. When we are done filing the paperwork with the county, state, Nevada, and two foreign countries I won't "own" anything; not even a checking account. Anybody else done this? I hate going to this extreme but case law really seems like it is over-compensating people for minor damages.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
I have read all the comments posted about Asset Protection. I am looking to start my own web site. Before people join I will have them agree to terms of use. Before reading all these comments I thought that would be enough to stop anyone or company from sueing me. Does anyone have any suggestions to someone who is new to the business world? Should I get an LLC before I start the web site? How do I transfer money from what my web site makes to my personal account (One comment suggested declaring myself as an employee with a salary)? Do I even need to declare a Business for my web site? Chris
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Not the digital kind :) Last year, a business associate was recently taken to the cleaners b/c she was acting as a sole proprietor in her business. She failed to perform on a deal and rather than just fair restitution, judgments were placed on all of her personal and business assets. Pretty sad and scary at the same time. After seeing this, I called my attorney and wanted to make sure that something like this could never happen to my family. So, I am just about to finish the last of paperwork regarding protecting my personal assets from anything that may happen in my businesses and vice versa. I have to say, it's pretty wild. When we are done filing the paperwork with the county, state, Nevada, and two foreign countries I won't "own" anything; not even a checking account. Anybody else done this? I hate going to this extreme but case law really seems like it is over-compensating people for minor damages.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
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A simple answer is that it is a lot of mis-direction or as my attorney likes to say "adding layers to the onion". What it boils down to is using multiple legal structures to hide / remove ownership of assets and companies.
My Blog A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects. - -Lazarus Long
Why isn't just forming an LLC enough? What "layers" can you add to the "onion"?