Asset Protection For Business Owners
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Asset Protection For Business Owners

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Asset Protection For Business Owners Asset Protection For Business Owners Presentation Transcript

  • By Ward J. Wilsey, JD, LLM
    3655 Nobel Dr. Suite 345
    San Diego, CA 92122
    (858) 764-2672
    wardwilsey@wilseylaw.com
    The Wilsey Law Firm www.wilseylaw.com
    Asset Protection for Business Owners
  • Protecting Business Owners
    Insurance
    Business Agreements
    Entity
    Segregated Business Ownership
    Qualified Plan
    Captive Insurance Program
    Domestic and Offshore Asset Protection Trusts
  • Insurance
    Typical Client
    Any small business owner
    Reasons for Insurance
    Protection
    Bank Mandate
    Types
    Mandated
    Unemployment and Social Security
    Workman’s Compensation
    Optional
    Employee
    Customers
    Operation
  • Reasons for Insurance
    Payment of Claims
    Excess Liability may not be covered
    Lawsuit Plaintiff may be willing to settle at policy limits
    Legal Fees
    Insurance company does not want to lose!
    Requirement for Doing Business
    Bank loans
    Malpractice required for insurers
  • Employee Insurance
    Health Insurance
    Disability Insurance
    Employment Practices Liability
    Key Employee
    Disability
    Life
  • Customer Insurance
    Liability
    Premises
    Auto
    Employee
    Umbrella
  • Business Operational Insurance
    Business Interruption Insurance
    Business Property Insurance
    Key Employee
    Life Insurance
  • Business Agreements
    Shareholder and/or Partnership Agreement
    Buy Sell Agreement
    Funded with Life Insurance or Liquid Assets
  • ENTITIES
  • Types of Entities
    Corporations
    Limited Liability Company
    Limited Partnership
    Professional Corporation
    Limited Liability Partnership
  • Client Profile
    If client has no other assets
    Business makes over $100,000 per year
    Business has liability other than that imposed by owner
    If client has assets
    Entity should always be used
  • What Entities Protect
    Entities Protect Against
    Liability of Employees
    Liability of Other Owners
    Liability of Premises
    Contractual Liabilities
    What Entities Do Not Protect Against
    Liability of Self
  • C-Corporation
    PROS
    CONS
    Oldest Type of Entity
    Most case law
    Limits Liability
    Possible Tax Benefits
    Possible Self Employment Tax Savings
    $800 annual fee from California
    Possible Double Taxation, especially for successful companies
    Capital Gains for Real Estate Transfers
  • S-Corporation
    PROS
    CONS
    Same Limited Liability Benefits as C-Corp
    No Double Taxation
    $800 annual fee from California
    Capital Gains for Real Estate Transfers
    Lack of some Fringe Benefits like C Corp
    Limited to 75 Shareholders
    Shareholders must be Citizens or Resident Aliens
  • LLC
    PROS
    CONS
    Flexibility
    Lack of Formalities
    No Double Taxation
    No Real Estate Transfer Taxes
    Possible Charging Order Protection
    $800 Annual Fee
    Gross Receipts Tax
  • Limited Partnership
    PROS
    CONS
    Flexibility of LLC
    Lack of Gross Receipts Tax
    $800 Annual California Fee
    GP required
    GP has liability
  • Professional Entities
    Limited Liability Partnership
    Accountants, Attorneys, Architects
    Similar to Limited Partnership
    Used more often by Accountants and Lawyers because “Partner” historically has more prestige
    Professional Corporation
    Simpler
  • Segregated Business Ownership
  • Segregated Business Ownership
    Reasons
    Remove Liability from Acts of Partners
    Avoid Being Drawn into Lawsuits
    Consider forming corporation to make loans to businesses instead of outright ownership
    Possibly convertible debt
    Remove Ability of Creditors to go after assets of company
    Instead, form separate entity to own assets, have those assets rented to main entity
    Equipment
    Receivables
    Possibilities are endless
  • Use of Qualified Plans
  • Qualified Plans
    Tax Deductible Asset Protection Strategy
    Bankruptcy
    ERISA style plans receive unlimited protection
    IRAs (Traditional or Roth) receive up to $1,000,000
    SEPs are not subject to limitations
    Rollovers are not subject to limitations
    Non-Bankruptcy
    only protected to the extent reasonably necessary for the support of the debtor and any dependent of the debtor
  • Types of Qualified Plans to Explore
    IRAs
    Roth IRAs
    401Ks
    Simple and SEP IRAs
    Traditional ERISA Plans
    412(i) Defined Benefit Plans
    419A(f)(6) Employee Benefit Plans
    419(e) Welfare Benefit Plans
  • Captive Insurance
    Insurance Company formed by client to provide risk coverage
    Operating Company pays premiums to Insurer, who in turn insures the Operating Company
    Premiums can be structured to be tax deductible
    Half of U.S. states have captive enabling statutes
    Most popular jurisdiction is Vermont
    Does not have to be offshore, although Bermuda is a popular choice
    Irrevocable Trust could own captive
    Move money outside of the client’s estates
    Best for larger businesses paying over $200,000 a year in premiums
  • Asset Protection Trusts
    Domestic or Offshore
    Control can be maintained via the use of client’s entity
    Just transfer percentage of business to Domestic or Offshore Trust
    Distributions from company now are distributed to Asset Protection Trust
    Result is that those distributions are protected from creditors
    Poor man’s version can be done for married couples using Family Gifting Trusts
    Reduces costs