Have you ever heard a homeless person being pursued by creditors in a lawsuit? It is unfortunate that such a person do not own any assets. However, people with no assets have nothing to give a security for financial credits. In the case of financial losses, creditors are usually very fast to file a lawsuit in search of auctioning one’s assets to recover their money.
However, debtors can look for business lawyers to help in asset protection. So, asset protection strategies are plans to inhibit or considerably reduce risks by shielding a business and personal assets from the claims of creditors. Business lawyers employ asset protection strategies to deter claim or the seizure of a client’s assets in a court case. The following are strategies that a business lawyer can utilize in ensuring asset protection.
Strategies business lawyers use to protect property
Separating ownership of assets
It is always prudent for any business owner to separate personal assets from those owned by the business entity. However, the sole proprietorship and partnership forms of business offer very little protection of one’s personal assets. A Limited liability company or corporations usually have asset protection should there be a lawsuit if the business fails.
Formalize informal partnerships
Business partnerships are the most delicate relationships one can get into. Most people say they are ticking bombs, waiting for a particular moment to low off. Each and every partner has their equity in the business. In case the partnership is informal, one partner can take advantage and put all the business assets at risk. Actually, the partner can offer his creditors the business assets to settle accounts with them. To protect the business assets, lawyers should always advise their clients to formalize any partnership businesses they may get into.
Titling of assets
It is vigilant to ensure that assets are titled. In asset protection, the court is prohibited from awarding equity of assets owned by different people. For example, one can register a home to be owned by him and his wife. This way, creditors cannot force one of the parties to sell the home to clear the debt. Titling of as asset owned by two or more individuals makes the interest in the property is indivisible. This automatically prevents creditors from the seizure of such assets.
Transfer ownership of the asset
This strategy aims to help a debtor retain the equity of an asset before the creditor seizes it. Creditors do not have the right to take hold of any assets not owned by a debtor. Most business lawyers propose the transfer of ownership binding trusts rather than outright sale. One can transfer the ownership to a relative like a wife or children. This way one can still have direct control over the assets. Furthermore, one enjoys seeing his or her heirs benefit from an asset rather than selling it.
Increase liability insurance
When a business is faced with a debt case, the Paramount line of defense becomes the insurance. Business lawyer’s advice is that one should get in touch with his insurance broker and increase their liability limits. This enhances the surety that one’s personal liability coverage is at least equal with his new net-worth. This raises your credibility, and the court does not have any ground to rule you as bankrupt.
It is worth noting that the strategies stated herein are not the only ones that can be employed. One should search for more strategies that expound on asset protection within his jurisdiction.