Asset protection sometimes gets a bad name. But when you have worked very hard and accumulated significant wealth, there is nothing wrong with trying to protect it. There are several things that you can do as a business owner to protect your personal and business assets.
One of the first things you need to do is incorporate your business into a corporation or LLC. If you have multiple different businesses or divisions, consider running each business in its own subsidiary corporation or LLC. If you own the real estate where your business operates, put the real estate into a separate LLC. No matter which business form you utilize, each subsidiary should have its own checking account, you should make sure you do not commingle funds, and you need to follow all the required formalities such as having annual meetings.
You also need to be aware of the different types of risks you and your business face, and obtain and maintain adequate insurance to cover such risks.
If you have done all the above, you should also consider setting up a domestic asset protection trust. Assets in such a trust are generally safe from claims of creditors so long as the assets were placed in the trust before the existence of any known claims. That is, you can properly protect assets from future unknown claims, but assets transferred into the trust after you face a known liability are recoverable by creditors.
Another step you might consider is placing assets in an overseas trust. These trusts are generally more difficult for creditors to find and attack. These trusts are also significantly more expensive to set up and administer.
AND ONE MORE THING. Recently enacted Ohio HB 479 increases the bankruptcy homestead exemption from $21,625 per person to $125,000 per person. So married couples will be able to protect up to $250,000 of equity in their home. This legislation also adopts the Legacy Trust Act which provides Ohio residents with a significant new asset protection tool. These new provisions go into effect March 2013. If you would like to know more about the new Homestead Exemption or the Legacy Trust Act, please call Josh Kin, John Clough or me at 937-223-1130 or contact me via email, Jsenney@pselaw.com.