It is our responsibility to protect the wealth we possess. When you own a small business, this task is doubled to include your company’s assets, as well as those of yourself and your family. Both can be threatened by tax overpayment, estate and death fees, and even litigation that may or may not be your fault.
Here are some things you need to know about asset protection.
What Is Asset Protection
An asset is anything in your possession – or that of your company – that holds value. It may include physical items like cash profits, cars or trucks, computers and equipment, or real estate and furniture. But it may also be intellectual property and copyrights, stocks, and anything else that can be owned by yourself, or your business.
When you protect those assets, you are creating a barrier between yourself and your possessions, in the case of threats that may diminish your personal wealth.
Lawsuits and Court Cases
If someone were to sue your business, and you aren’t properly protected, they could take personal assets not associated with your company as per the judgement. Some people think that incorporating a business will protect them from that, but there are several forms of litigation that don’t follow those rules.
Filing an LLC, or even several LLCs based on different parts of your business, will create a bubble where lawsuits can take their judgements and settlements. You should also have a good attorney on retainer.
Tax Payments and Future Taxes
Right now, while your business is relatively small, you might not be that worried about taxes. Some years you won’t even be required to pay any, unless you made a profit that was over the line that the IRS considers high enough.
But if you were to, say, start out in the red by $100,000, and then five years later you end up successful and building your business worth to $500,000, you owe taxes on that increase. It is called Capital Gains tax, and it can be a killer. Especially if you decide to sell your business in the future.
Setting up a Charitable Remainder Trust (CRT) allows you to transfer assets into a charitable account that protects you from Capital Gains tax.
After Death Protection
Did you know that when you die your estate can be broken up and huge death and estate taxes may be taken from its value? Or that if someone contests your will it could completely ruin the way you originally chose to have your company run when you were gone?
You need a custom made, carefully written plan by a professional that specializes in business and estate wills. Never trust the pre-made plans offered by companies, which will almost certainly not follow by the best steps for your unique situation.
Protect Yourself, Your Family, and Your Wealth
It is up to you to take the right measures to safe guard your wealth from any conceivable risk. The above tips will help keep you from falling into the most common asset traps.
Jackson Cooper is a investment & finance enthusiast, involved with the experts at American Society For Asset Protection. Look to American Society For Asset Protection, true leaders in the professional asset protection industry, to properly guard your assets from lawsuit & litigation. Connect with them online on Facebook – American Society For Asset Protection or LinkedIn. Learn More On The ASAP YouTube Channel