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Asset Protection Advantages

The Taxi Corporation Case

One of the more famous cases on asset protection involved a taxi business. The taxi owner had structured his business with multiple corporations, each owning one taxi. A plaintiff sued and argued that the assets of all the corporations should be at risk to satisfy his claim against one corporation.

The court ruled that the taxi owner had a legitimate business reason to structure his affairs in separate corporations. The plaintiff was able to recover only from the assets of the one corporation that owned the taxi involved in the accident — one badly damaged taxi.

Proper Asset Protection Reduces Lawsuits

One of the first things most plaintiffs' attorneys will do, before even filing a lawsuit, is to investigate if the defendant has assets that are subject to execution in the event of a judgment. When your affairs are structured so as to minimize your risks, and plaintiffs' attorneys find out your assets are protected, you greatly decrease your likelihood of being sued.

As a defendant, there is no better way to win a lawsuit than to not even be sued in the first place.

Use Multiple Entities

Having multiple entities is probably a wise idea for your affairs. With the emergence of LLC's, and a body of case law upholding them, creative entity structuring is usually possible to suit any business situation.

With today's computers, managing multiple entities is easier than ever. Your entities can even be structured so that they do not exist for tax purposes, but still exist for liability protection. When you do your taxes, the income and expenses from the disregarded entities are consolidated with other entities on one return.

Avoiding Fraudulent Conveyances

Forming an LLC or a corporation is easy. A Google search will give you dozens of companies offering to set them up for you for very little. What you most need is the right structure for moving your assets into the entities you set up, and the proper way to manage your entities, so that they will withstand any attack by potential creditors.

A transfer of an asset, to prevent it being taken to satisfy a creditor, if not done properly, is called a fraudulent conveyance. When courts rule to pierce entities, or the assets in them are seized to satisfy judgments against another entity, very rarely is the failing the fault of the entity structure itself; it is the transfer of the assets into the entitles that the courts will most often pierce. This is the part that requires expertise.

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Jerry can help you develop and manage an entity structure for your affairs that best minimizes your risks.

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