An equally important aspect of doing business often neglected by a lot of business owners is asset protection.
Business owners overly focus on growing and acquiring assets but never seriously looking into how they protect their asset. In the event of claims or lawsuits, the properties and wealth that they’ve worked hard for become very vulnerable to seizure.
What is asset protection?
Asset protection is a set of strategies implemented to shield your personal and business assets from risks such as lawsuits, claims, bankruptcy, and divorce settlements arise in the future. While it doesn’t actually prevent any creditor or plaintiff from filing claims or lawsuits, asset protection makes your assets out of reach. Having a solid asset protection dissuades potential creditors from targeting you.
Asset protection is of particular importance in a highly litigious society such as ours. According to TracReports, which tracks the number of civil filings, the federal courts received 21,695 new lawsuits in December 2018. Torts, Personal Injury and Product Liability account for 17.9% of civil filings and represent the largest number. Included in this category are frivolous lawsuits frequently instigated by unscrupulous financial predators who use our laws to take advantage of business owners.
With our present tort laws, almost anyone can file an absurd lawsuit against businesses and end up being “financially rewarded.” Creditors and plaintiffs are emboldened to file claims, with the thought that they won’t lose anything if they take a business to court. This is a bitter reality that business owners must not overlook.
Benefits of Asset Protection
Asset protection planning involves a serious forethought and approach. Starting to protect your assets today even without actual threat is something every business owner should do. Below we take a look at how asset protection can benefit your business.
Minimizes the risk of being targeted with a lawsuit
As mentioned above, creditors and unscrupulous plaintiffs are less likely to sue your business if they know they can’t get anything from you. Credentialed CS&P consultants specializing in asset protection have noted a low incidence of lawsuits among businesses they work with. To ensure maximum protection, these specialists conduct a thorough analysis of the assets, identify potential vulnerabilities, and determine the best strategy to implement.
Augments security provided by insurance coverage
While insurance policies do help protect you and your assets, they don’t cover all assets and situations. Insurance policies normally have exclusions or limits. In fact, they have very rigid terms of reference that stipulates what situations the policy covers. Asset protection helps fill in any gaps or limitations of your insurance coverage.
Provides maximum financial privacy
Asset protection guarantees your privacy. Using the right strategies, you can keep to yourself your exact net worth and the type of assets you own. It’s also a great way to minimize your declared net worth. Asset protection dissociates assets from you in the public eye; hence, they don’t become a target of lawsuits. This level of confidentiality should discourage potential plaintiffs from filing frivolous lawsuits.
Secures assets from legal seizure
In the event creditors or plaintiffs get a favorable adjudication, they can legally seize your assets. However, if you have a carefully laid out asset protection plan, they can’t possibly reach your assets and they’ll remain untouched. Attaching these properties to you would also be nearly impossible; hence, they don’t have any chance of acquiring your assets even if they have legally binding judgment.
Take note that asset protection shields your assets not just from creditors but to any unscrupulous party who wants to obtain your assets through legal proceedings.