Limited Liability Companies
If you find out that you are going to face a legal action, and you convey assets into an LLC as a response, this would be viewed as an illegal fraudulent conveyance.In addition to the asset protection benefits, limited liability companies are flow-through entities from an income tax perspective. The profits and losses from the business would be claimed on your personal income tax forms. As a result, you get the simplicity that goes along with a sole proprietorship without the risk.
Family Limited Partnerships
Since you are the general partner, you have sole authority when it comes to actions that are taken by the family limited partnership.The best way to explain the value of a family limited partnership is through the utilization of a simple example. Let’s assume that you are a real estate investor, and you own two apartment buildings. You are concerned about the possibility of someone filing a lawsuit after getting injured on one of your investment properties.Under these circumstances, you could convey each property into a separate family limited partnership.
If someone is injured in one of the apartment buildings, and they file a lawsuit, the other one would be protected. The personal assets of all members of the partnerships would also be out of the reach of the litigant.One could take additional steps to protect assets by holding limited equity in the buildings. Plus, if any member is personally sued, the assets that are held by the family limited partnerships could not be attached.
Business Succession Planning
The value of the policies would be equal to a business share. After the passing of one of the co-owners, the business would use the insurance policy proceeds to purchase the share that was owned by the deceased partner from his or her family. This is one type of buy-sell agreement, but there are a handful of others that work in a similar manner.
Family Businesses & Estate Taxes
Contact Garofalo Law Group
We are here to help if you would like to discuss asset protection and business planning with a licensed attorney. Contact us for a free consultation or give us a call at (312) 753-6000.