Consider this; America is the most litigious society in the world. It is estimated that there are 80-90 million lawsuits filed in our country each year. With the downturn in the economy the amount of lawsuits being filed is only increasing. It is more important than ever to utilize legal tools to protect your assets from frivolous lawsuits.
One of the best asset protection options is to create a legal entity that is separate from yourself. I believe it was John D. Rockefeller that said, “Own nothing, control everything.” If you don’t own the asset the likelihood that an attorney in a frivolous lawsuit will be able to take it from you significantly decreases.
The legal entity of choice in today’s litigious society is a Limited Liability Company (LLC). There are many advantages to an LLC that make them the entity of choice, including the fact that just one person can own the LLC, thus controlling the business entity without the interference or politics of a board. The LLC can also be taxed as a disregarded entity, a partnership, or a corporation. The member can make the tax election for the LLC.
By transferring assets into an LLC the owner of the LLC can receive inside creditor protection and outside creditor protection, as long as the LLC is setup properly and maintained properly. Inside creditor protection ensures that any personal assets outside of the LLC are not subject to any lawsuits that happen in direct relation to the LLC business. Outside creditor protection ensures that any LLC assets are not subject to any lawsuits that happen to you personally. This is a great way of shielding your personal assets from creditors of the LLC and shielding LLC assets from personal creditors.
The key to any legal entities ability to protect your assets from frivolous lawsuits is the agreement that creates the legal entity. In the case of an LLC this agreement is called an operating agreement. The operating agreement is the legal document that outlines how the LLC works and it is also the document that gives all of the asset protection of the LLC. Without a legally sound operating agreement the assets inside the LLC are not protected like they should be, allowing creditors easier access to them.
It is imperative now more than ever to find ways to protect your hard earned assets from frivolous lawsuits. The attorneys at MH have been assisting clients with asset protection for over 40 years in the state of Arizona. We would be happy to sit down with you for a complimentary consultation to discuss ways to protect your assets.
Contributed by MH Prescott, Flagstaff and Phoenix Estate Planning Attorney David T. Eastman
What the Attorneys of Morris Hall Can Do For You:
The attorneys at Morris Hall have 100’s of years of combined experience ensuring that families’ assets are protected from probate, unnecessary taxes, creditors, ex-spouses and Medicaid spend-down. The attorneys also help those in Arizona to apply for and receive Medicaid assistance and Veterans Benefits. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.