Being an entrepreneur isn’t easy. You are your own boss – yes. But that also means you shoulder the responsibility of scaling the business, catching the daily crumbs, innovating new ideas, and making the tough choices about how you’re going to structure your business to best protect assets and guarantee growth.
Most business owners I meet initially think registering their company as a Limited Liability Corporation (LLC )is enough because it eliminates personal liability. But folks, I’m going to explain why an LLC is not enough – it just isn’t! As both a financial planner and a business consultant, I approach business and financial wellness from the perspective of Foundational Planning.
If you were to start constructing a house, would you begin with a cracked, crumbly foundation? Absolutely not. So, why do you approach your personal and business finances as if you can “make it up” along the way? The truth is, those who succeed in the game plan early. Trust me, the foundation matters! You don’t want to have to start over while battling litigation in 10 years.
When I talk with potential or established business owners about asset protection, part of what my team and I lead them through is understanding the layers of asset protection.
There are three layers to this tower:
Revocable Living Trust
- A trust is 100% private and makes it very difficult for anyone – whether they are disgruntled beneficiaries or sue-happy individuals – to litigate against you.
- We teach our clients to “fund” their trust with assets so that the assets (house, car, business assets) are no longer tied to their personal name.
- To litigate against our clients who have funded their trusts with their assets, the disgruntled individual would need to litigate separately against the owners of the trust and everyone listed in it – including the successor trustee.
- Suing everyone in a trust is both expense and unfeasible for the average individual.
Limited Liability Company (LLC)
- The second layer is setting up a Limited Liability Company
- This adds a much-needed layer of protection because it eliminates personal liability
- Just like you’d separate your personal and business finances, if you have more than one business, we suggest setting up more than one LLC. This reduces the pain points in the event one of those businesses is litigated against.
- LLCs are easy to set up and maintain – our firm helps with this and all other aspects of business set-up.
Running income from these businesses through a tax shelter
- We teach our clients how to legally utilize tax shelters as a “pass through” to pay less in taxes and to protect them in the event of litigation
- There are a handful of strategies available which are best explained in a one-on-one meeting (never any cost or obligation to learn – that’s our job!)
- When you run monies from the business through a tax shelter and have your assets protected in a trust, most attorneys will not pursue the case and it is not uncommon for the judge to dismiss the case, either.
- We teach our clients how to legally utilize tax shelters as a “pass through” to pay less in taxes and to protect them in the event of litigation.
- The tax shelter strategies we teach still give you 100% control of your funds and include built-in protections like long-term care and contract growth guarantees of 3-5% compounding interest.
At the end of the day, having only one or none of these strategies in place puts you and your business at risk. It is never too late to restructure your business foundation to prevent mishaps down the road. Furthermore, my team and I will help develop a plan for you and answer all of your questions for no fee and with no obligation to work with us. We just believe in what we do immensely and know that the strategies we help business owners like you implement work.
So, get in touch today and bring a notebook – we’re going to cover a lot and help you put your best foot forward with your personal and business finances.
What are your thoughts? Please comment below and share this article.
Mandy Froelich
