Have your planning in place, avoid hair on fire situations…

I speak to owner groups across the country. These are owners of rental properties and all kinds of other businesses.

I get to hear what is important to these owners and understand the help they need. I see a lot of planning that is outdated or just not in place at all. This is true for both estate and asset protection planning.

Lives change, laws change and the planning is no longer addressing all the important areas. And this is the case for individuals and families who don’t own a business. All of us need to be organized and updated, no matter how simple you think your situation is.

In my webinars, I often talk about guarding assets from unforeseen liabilities. I also address how estate planning integrates with asset protection. My blog drills down on a few important components of asset protection for owners. Even if you don’t own a business, the concept of asset protection is appropriate for you too. Poor estate planning, for example, can destroy wealth in a big way.

An LLC is a business structure. It separates personal and business liabilities. This means your personal assets are safe if the business is sued. Creditors can only go after business assets. For rental property owners, an LLC protects each property from risks tied to others. If a tenant sues, only the LLC’s assets are at risk. Your personal finances stay protected. Setting up an LLC is a key step in shielding your personal wealth.

An operating agreement sets the rules for your LLC. It outlines how the business is run. Even if not required by your state, it’s important. It shows that your LLC is separate from your personal affairs. This helps protect your personal assets in a lawsuit. Without it, courts might ignore the LLC and come after your personal assets. It also helps prevent conflicts between members. An operating agreement is a simple but powerful tool. It strengthens your LLC’s legal protection.

A single-member LLC has one owner. It’s easy to manage but may offer less protection. Some courts don’t respect the separation between the owner and the LLC. This can put personal assets at risk. A multi-member LLC has more than one owner. It usually provides stronger protection. Courts find it harder to “pierce the corporate veil” in multi-member LLCs. This means your personal assets are safer. Having multiple members can add complexity. But it also strengthens the LLC’s shield against lawsuits.

Not all states treat LLCs the same. Some states offer better protection for your assets. States like Delaware, Nevada, and Wyoming are popular choices. They have strong laws to protect business owners. In some states, it’s easier for creditors to take your personal assets. Choosing the right state for your LLC matters. It can make a big difference if you face a lawsuit. Always consider the legal environment before you form your LLC.

A living trust is a legal tool for estate planning. It can own your LLC while you keep control. By putting your LLC in a trust, your assets avoid probate when you die. This makes transferring ownership faster and easier. It also keeps your business private. The trust protects the LLC from certain legal challenges. You still manage the business, but the trust holds ownership. This helps protect your wealth and ensures a smooth transition to your heirs.

-Harry Barth, Esq.

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