How To Protect Your Business Assets
Whatever business you do, there is significant risk that can be sued in a litigious society. Claims can range from negligence claims for defective products or disputes with employees. Combining is a way to guard against this potential threat.
Single Incorporation for Protecting Your Personal Assets
Combining your business is a method for creating a legal wall between your personal and business assets. Assessment of your business will not affect your personal assets. While your house, savings, stocks, etc., are protected, what happens to your business if the assessment is given to your business, business assets can lose.
Double Incorporation Strategy for Protecting Your Business Assets
Many businesses can profit from the merger of two strategies. This strategy is designed to address situations where a business has significant assets affected by the risk of litigation. If you enter your business, then your personal assets are not at risk. But what if your business has a number of high-value assets such as manufacturing machinery, office equipment, a popular domain name, custom software or other goods? Just enter your business will not protect these assets because they are owned by business entities. Because a successful lawsuit will result in an assessment of the business entity, any business assets can be seized as part of the assessment. In short, you lose the machinery, office equipment, intellectual property or other items of value. Double incorporation strategy to prevent this scenario.
As the name suggests, the double incorporation strategy involves the creation of two business entities. The first is “at risk” your business that interacts with your customers or clients. The second entity, a “holding corporation”, then created to have a valuable asset of your business. This holding corporation will lease the business assets that are relevant to your “at risk” entities. If the “at risk” entity being sued, the parent company can only recover the assets and the plaintiffs were forced to be content with a penny because “at risk” entities have several assets. In essence, the plaintiff won the battle, but lost the war.
Most people know that the business entity can be used to create a protective shield for their personal assets. If your business has high value assets, now you can use a combination of two strategies to protect assets as well. What is your opinion?
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January 31st, 2010 by Ardy | No Comments »