1. My business is separate from me.
Your business isn’t separate from you and your family unless you make it separate. You think that you are leaving your house and going to work, but really you’re not leaving anything. If you don’t make your business separate and treat it as separate, then it isn’t. If your business gets sued, you and your family will be sued and vice versa. Attorneys sue everyone with money in their name and ask questions later when they begin their fishing expedition AKA “discovery.” If they forget to sue a party with money they cannot go back and try again for the same issue.
2. An LLC will save me and my family from any problems with the business.
Great, you’ve made your business separate and created an LLC, but that doesn’t solve all of your problems. You see, there is something called, “piercing the corporate veil.” What this means is that if your business isn’t operating completely separate from your personal accounts and life, then a creditor can come after your personal assets by saying that your LLC is just a personal asset in costume. All of the books have to be in order and nothing can be paid from the business for personal use. Remember when your spouse called and asked you to get groceries and all you had was the company credit card? That could come back to haunt you. 98% of small business owners do this at least once and it is their downfall in a lawsuit.
3. Estate planning and business are two separate things.
They can be, but that wouldn’t be prudent. The business has to be run by someone if something happens to you. The business has to be kept going until it can be passed on to whomever you choose. Also, estate planning devices can add an extra layer of protection, so that your business is and stays separate from you personal assets.
4. If someone sues my business partner, that has nothing to do with me.
You would think so, but what if that person or entity takes part of your business and you effectively have a new unwanted partner? If you own an LLC with a partner, there are some protections called “charging orders” limit a partners creditor to only taking the assets that they would take home. Still, a savvy lawyer can get the courts to force the partner to sell his part of the business to pay the creditor. Then you have a new unwanted business partner anyway.
5. If none of my children want my business, it has to be sold.
Your business can keep going long after you are gone. Your business can be held and run and all the benefits can be passed on to your children or whomever you wish. The beneficiaries don’t even have to be involved…its your business and your rules, even if you aren’t around anymore and you set it up correctly.
What you can do to protect your assets:
First, if you haven’t guessed it, get the business away from your personal assets. Most entrepreneurs don’t think it will happen to them because their idea is the best thing since sliced bread, but the fact is that 80% of startups don’t last 5 years. Don’t let a failed business ruin your family or life savings. You need to form an LLC, but you need to form one that is all-but-immune to “veil piercing.” You can do that by not owning your LLC. The way to work for and control an LLC without owning it is to have an Irrevocable Trust, that is built for this kind of protection like the UltraTrust, own it. If the anyone tries to “pierce the corporate veil,” they aren’t going to end up in your personal bank accounts, they are only going to end up being in trust. That’s the advantage of using what is traditionally an estate planning device to protect you and your family.
If both you and your partner place all the shares of the LLC in the trust and work for the LLC, if one of you are sued or goes into debt, then there is not share for the debtor to take over. The debtor may be able to garnish some wages, but various states only let them take so much. The other partner still doesn’t have to worry about getting an unwanted creditor as a partner.
So, by now, you probably guessed how to keep the business going after you are gone. A solid Irrevocable Trust like the UltraTrust will work. You put in a business savvy trustee to oversee the trust assets. That trustee makes sure that there is good management in place in the business and then “sprinkles” assets to your children or beneficiaries as they need them. All the while, the main asset is safe in the trust. The trustee even has instructions not to pay debts or court judgments, and the beneficiaries don’t own the LLC or the trust, so the LLC and accompanying assets are safe.
The combination of the UltraTrust and an LLC can protect both your family and your business and keep things running smoothly long after you are gone.
Protect your assets for yourself and your children and beneficiaries and avoid tax dollars. Assets can be protected from frivolous lawsuits while eliminating your estate taxes and probate, and also ensuring superior Medicaid asset protection for both parents and children with our Premium UltraTrust Irrevocable Trust. Call today at (888) 938-5872 for a no-cost, no obligation consultation and to learn more.
Rocco Beatrice, CPA, MST, MBA, CWPP, CAPP, MMB – Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an “AA” asset protection, Trust, and estate planning expert.