Why You Should Never Combine Business and Personal Assets
Many people confuse asset protection planning with estate planning. The purpose of an estate plan is to distribute your assets after your death. It does not protect your assets while you are alive. Protection from creditors depends on how you hold your assets.
Never Combine Business & Personal Assets
Business assets should never be held together with individual or investment assets. Using an entity such as a limited liability company, commonly called an "LLC," separates risk and liability for each venture. For example, your LLC owns a building and rents it to another company owned by you. This protects the main company's assets from liability for accidents at the building.
Separating Assets Can Protect Them From Claims
All of the assets of your businesses are subject to creditor claims if they are not in separate entities. Different entities can also help protect you individually.
LLC's Provide Better Individual Protection
LLCs can provide more individual protection than using corporations. Corporate stock can be taken by your creditors. Membership interests in LLCs cannot be taken by your creditors.
An LLC Can Act As A Deterrent To Creditors
If properly structured, an LLC can be used to create a deterrent to your creditors. If you already have claims or potential claims against you or the only motive for a transfer is to avoid creditors, asset protection planning will not help.
I am Beth Cohn, an attorney here at Jaburg|Wilk and help businesses and individuals protect their assets. Each clients' situation is different. We can help you structure the ownership of your assets to help protect the wealth you have accumulated from all your hard work.
This article is not intended to provide legal advice and only relates to Arizona law. It does not consider the scope of laws in states other than Arizona. Always consult an attorney for legal advice for your particular situation.