How Business Owners Should Hold Their Assets ?

How Business Owners Should Hold Their Assets ?

A business owner or investor should always be wary of others.  You are looked at as a deep pocket…someone who has money…someone who has more money than those who are looking at you so naturally you should give them some of your money.  Plus, the business owner always has to worry about the taxman, breach of contracts, employee claims and defective product or services, etc.  All of these items paint a huge target on the business owner’s back.

My theory has always been, that the business owner must always prepare for the worst and have himself set up so that if he has to file bankruptcy tomorrow he can and he will not lose any of his assets.  The business owner should want the security of being able to file bankruptcy to discharge a liability without having to sacrifice any of his assets.  The business owner needs to be able to file bankruptcy tomorrow and then continue in his business as normal the day after.

This can be done with proper planning.  And with proper planning it is likely that the business owner will never have to file bankruptcy even if he has been set up to do so.  The fact that the business owner can file bankruptcy, takes away the threat of really having to file bankruptcy.  If the business owner is set up to file bankruptcy he has nothing to risk when an expected liability arises.  For if the liability arises, the business owner can dodge or ignore it because he is set up correctly.

How do you do it?

  • Operate your daily business in a corporation;
  • Lease your employees from another corporation you own to your operating business;
  • Hold no assets in your operating corporation;
  • Hold your non cash investments in an LLC;
  • Own your LLC with another party who is not your spouse, but don’t give this other party any voting rights;
  • Strip your residence of its equity by a line of credit or a deed of trust;
  • Don’t personally guarantee anything and 8. Get an umbrella policy.

 



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