Running Your Business
BizFilings provides useful information to help you manage and grow your business.
In order to protect assets from creditors, a small business owner can fund the business by encumbering the assets of the business with liens that run in favor of a holding company or the owner himself or herself.
In order to protect both your business and personal assets, it is necessary to make sure that they are kept beyond the reach of creditors. Funding your business by a combination of equity and secured debt is one strategy that can protect your assets. In addition, keeping the title of assets divorced from the entity that runs the business day-to-day also can defeat creditor's claims.
Instead of using a multiple entity organization of a holding company and an operating company, leases, liens and loans can be used to fund the business. In this case, the owner personally owns the assets and serves as the "holding company." Although simpler this is far riskier from the asset protection standpoint.
Using holding and operating companies is an asset protection planning strategy that helps to limit liability risks in your business structure. An ideal business structure consists of an operating entity that does not own any vulnerable assets and a holding entity that actually owns the business's assets. With this structure, the small business owner can eliminate (or, at the very least, substantially limit) liability for both business debts and personal debts.
Corporations and limited liability companies (LLCs) are legal entities governed by state law. You form these entities by filing articles of organization that met the state's requirements and by paying fees to the appropriate state agencies. These documents describe the entity, identify its owners and provide for a registered agent.
There are numerous state and federal laws that a small business owner can use to to recoup losses due to fraud or unfair business practices.
The American legal system, contrary to what you see on television, does not like either party to be surprised by witnesses or evidence presented at trial. Once the lawsuit is filed, both sides have the right to discovery--a period when the opponents are forced to answer questions and turn over documents. Many lawsuits are won or lost in the discovery phase. You need to be prepared and cautious.
In most lawsuits, each party must pay his or her own court costs, including attorneys' fees. This is usually more of a burden on the defendant who must pay out of his or her own pocket. The plaintiff's attorneys frequently take a portion of the damage award as their fees, reducing the amount received, but sparing the plaintiff any out of pocket expenses.
To ensure that taxes do not consume the wealth you have worked so hard to create, it is necessary to plan ahead. Part of that plan may include transferring business interests to family members while you are still alive. This article highlights some of the strategies that can be used to transfer business interests without giving up control of your business before you wish to do so.
Selecting the right type of organizational form for your business requires that you carefully balance simplicity, asset protection, cost-effectiveness and tax ramifications. Generally, the LLC will be the most flexible and effective choice, but in some cases the corporation may make more sense.
Even though there are considerable risks involved in litigation, there are significant opportunities available to the small business owner to control these factors.
Being sued can ruin your life, both financially and personally. Unfortunately in our litigious society, the small business owner runs the risk of lawsuits from many directions--injured customers, disgruntled employees, contentious suppliers. Knowing how the legal system works--and the risks inherent in the system--enables you to minimize the damage a lawsuit can cause.
Automobile liability insurance is an absolute necessity for every business owner. Although many states require some level of liability insurance, it is critical that you carry enough coverage to protect your assets in the event of an accident.
Liability insurance exists to shield your assets from the grasp other others. Property insurance exists to protect you when your assets are lost or distroyed. General property insurance covers the most common risks, but in certain situations, you should consider specialized insurance, such as business interruption coverage or fidelity insurance.
Liability insurance should be the last line of defense for a small business owner who is implementing a comprehensive asset protection plan. Liability insurance covers damages (both personal injury and property damage) you, your employees, or your agents cause. Liability policies can be general or can cover specialized types of misconduct, such as malpractice.
Insurance is vitally important to a small business owner who wants to be protected from day-to-day liability risks. But, one must have the correct types and amounts of insurance to be protected.
Limiting liability in your business structure involves choosing the best an organizational form. However, selecting the state in which to form the business is also a significant consideration.
"Limited liabilty" is an important consideration when choosing an organizational form for your business Limited liability doesn't refer to the amount at risk. It refers to a separate between business and personal assets--so that business creditors can not reach your personal assests and vice versa. Only corporations and LLCs provide of the owners with full "limited liability" in every state.
Special note should be made of a particular type of corporation--the statutory close corporation. In a strict sense, this is not a separate business form. It is, instead, a corporation that is regulated by a special state law. This statute, a supplement to a state's regular corporation statutes, governs most of the operations of this type of corporation.
You need to consider many factors when deciding how to structure your business. One of the angles that you must consider is asset protection. From this vantage point, operating as a sole proprietorship or as a general partnership is risky because your business creditors can get to your personal assets, as well as your business assets. However, limited partnerships (LP), limited liability partnerships (LLP) and limited liability limited partnerships (LLLP) provide some measure of protection .