I recommend to all my precious metals investor clients to form a limited liability company, LLC, as an important initial strategy to protect their personal wealth, and family assets, from being utilized to pay Business debt, lawsuits, judgments and creditors.

However LLC protection of liability is not 100% complete. As such, you will want to create an LLC Asset Protection strategic plan.

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LLC Asset Protection 

When you start a business and form an LLC it is a new business entity which is completely separate legally from its members, which are its owners. It is this distinct separation which gives some, limited, financial exposure of the business owners to possible company indebtedness.

If the LLC is unable to pay its business expenses and incurs debt, the companies creditors are not allowed to seize, nor garnish, the members assets such as real estate, vehicles, investments and  bank accounts.

Each owner, or member in the LLC, will only be responsible for the amount of money they have put into the commercial venture.

There are some important exceptions.

• LLC members will still be responsible for any expenses that they have personally guaranteed for the business concern.
• Also they must pay all payroll taxes, which are not covered by limited liability.
• Additionally, they are at risk for being sued personally for any wrongdoing or fraud.

Get insurance for your LLC

To protect individual LLC members I recommend purchasing a solid liability insurance policy that covers both you, as an individual, and your company in the event you get sued in a lawsuit.

This can happen easily.  These days businesses are getting sued for such issues as building maintenance negligence, errors and omissions, and bad faith. The size of judgments in losses for personal injury are staggeringly high and increasing all the time.

Keep your LLC independent

My number one rule is to always, I said always, keep your personal and business assets separate.

The IRS and the Court look for “alter ego identity”, which is when there is co-mingling of funds and they will penalize you severely. My vote for best accounting system for small business is Quickbooks Online. It allows you to set up separate companies for your business and personal accounts, that can be used in a lawsuit as evidence of separation of transactions.

To steer clear of this type of liability, the corporate alter ego, maintain all LLC finances, bank accounts, and records totally separate from all members personal finance transactions.

1. Your limited liability company must have its own bank account and credit cards.
2. All business contracts, customer invoices, purchase orders and other commercial documents must have the LLC legal name on them, and be signed by the LLC – not you personally!
3. You must make it crystal clear that all business is being conducted by your limited liability company which is entirely independent and a separate entity from you, the person, the entrepreneur.

LLC Credit History

To further protect you and your family from having to personally pledge your assets, such as your home for business loans, you should build a strong credit rating for your LLC.

• Establish a record of revenue and profit recorded in a trusted source such as your annual tax returns.
• Pay your bills on time
• Get your LLC credit cards and pay them off completely on a monthly basis.

Maintain a Moderate Bank Balance

Only keep a small amount of money inside of the LLC account at any one time. Because these monies will be used to satisfy any creditors or lawsuits against the business if you are sued. Pay the members regularly out of the LLC funds to keep the bank balance low.

However, if you already owe a business creditor DO NOT transfer money out of the LLC, because this will be seen as a transfer that is fraudulent. You are at extreme risk of the court making you personally liable for “alter ego” fraud.

Beyond LLC for Personal Asset Protection

You know that LLC’s will not protect you, or your personal assets completely. If you are sued for any wrongdoing you have done personally or for any business debts that you have guaranteed yourself the LLC will not protect you against those creditor collections.

However, depending upon the state that you live in there are some ways to get personal asset protection.

• Trusts are a way to hold assets and protect them against debt collectors. But they must have been put into the trust years before the lawsuit or indebtedness.
• The good news is that certain property such as your primary home, your retirement savings account are generally protected from commercial creditors

I highly recommend you consult with an experienced attorney well-versed in business LLC  whom will advise you on your options for greater shields against business obligations and debts –

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Using an LLC for asset protection is a wise entrepreneurial move when combined with the distinct separation of personal and business monies plus adequate insurance.

Life is unpredictable. We can only do our best planning and protection to reduce risk and financial asset exposure.

Video of my colleague, Attorney Clint Coons, explaining the Asset Protection Benefits of LLC – Limited Liability Companies

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