North Carolina Long-Term Care Planning Lawyer Explains How to Protect Your Business
Many people have concerns about asset protection. This is especially true for business owners and professionals, who are exposed to more risk than others.
More than 80% of businesses in the United States are family-owned. Family-owned and operated businesses account for 50% of the country’s employment and 50% of the Gross National Product. Yet the majority of family businesses fail to survive the transition from one generation to the next. Only about 30% of family businesses survive to the second generation, and only a scarce 13% of family businesses survive to the third generation.
When I mention asset protection planning to business owners, I frequently encounter these common reactions:
- I’m incorporated (or I have an LLC) so I’m protected
- I’ll put everything in my spouse’s name
Many business lawyers tell business owners that they should set up a corporation or limited liability company for liability protection. While this is true, it’s only partial protection.
There are actually two types of liability that need to be considered: inside liability and outside liability.
Business entities such as corporations and limited liability companies provide inside liability protection by protecting owners from the inside out. For example, you own a construction company and someone gets injured on the job site, or an employee is suing you over a worker’s compensation issue, or maybe you are party to a contract dispute. When these types of lawsuits come along, having the corporation or LLC in place protects your personal assets from the lawsuits.
Outside Liability
But what if you’re ever being sued personally? For most business owners, their business is their livelihood and source of income. So what happens when you cause a bad car accident and are being sued? Or when someone gets injured at a party hosted at your home or at your vacation home? Next thing you know, they’ll be suing you and trying to take away not just your personal assets, but also your ownership in your own business! Everything that you own, including your business, is exposed to that lawsuit and could be lost. This is what we call “outside liability.”
And what many people don’t realize is that even a single lawsuit, even if it has no merit, can still threaten what you’ve worked hard for over your lifetime to build and save. Many aren’t able to recover from the financial hardship.
What many people don’t realize is that there are things you can do to limit your liability exposure and protect your assets. We can help you create a comprehensive plan that maximizes your liability protection, keeping your assets away from future lawsuit creditors, while still allowing you control and flexibility.
Don’t wait until it’s too late to engage in asset protection planning. If you transfer assets or take actions to avoid liability from a pending lawsuit or act that has already occurred (even if a lawsuit hasn’t been filed yet), the courts may view such transfers as an attempt to defraud creditors and will likely be voided.