Asset protection involves arranging assets to preserve their value and separate them from potential liabilities. Due to lawsuits, proper asset protection through entities like LLCs and corporations is important. These structures offer liability protection while maintaining ownership and control over assets. Multiple structures can provide "dual protection," with one owning the asset and another leasing it to interact with the public.

1. Asset Protection
For Businesses & Real Estate Investment
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC

2. What is Asset Protection?
• Asset Protection is the process by which a
person arranges his or her assets in a
manner that will preserve as much value of
that asset as possible.
• This process requires segregation of assets
from potential liabilities.
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC

3. Why Do You Need Asset
Protection?
• Each year our unreformed legal system
awards millions of dollars to lawsuits.
• Due to our litigious society, people believe
that their wealth potential is directly
correlated to their ability to sue.
• Lawsuits are mostly generated through a
financial desire. If not, then the poor would
LAW
be sued just as often.
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MICHAEL RICHARD POWERS, LLC

4. Asset Protection Capabilities
• Traditionally, there were very few options
to protect one’s assets and a sole
proprietorship was never an option.
– Today the options are almost limitless.
– Each option is unique to the individual and
must represent a proper cross section of asset
protection, tax minimization and personal
control.
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MICHAEL RICHARD POWERS, LLC

5. Sole Proprietor
• Owner of Taxes Paid By Owners
Directly to the IRS
Company
ABC
Profits Pass Directly
to the Owners
Liability DOES Pass
to the Owners
• Company
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MICHAEL RICHARD POWERS, LLC

6. Methods of Asset Protection
• Incorporation
• Limited Liability Companies
• Limited Liability Partnerships
• Borrow and Encumber the Asset
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MICHAEL RICHARD POWERS, LLC

7. Structures for Business Owners
• The two main business structures used in
asset protection for businesses are:
– The S Corporation, and
– The Limited Liability Corporation.
• Both of these structures have their own
advantages and disadvantages.
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MICHAEL RICHARD POWERS, LLC

8. The S Corporation
• An S Corporation is simply a C Corporation
(also known as a standard business
corporation) that files IRS form 2553 to
elect a special tax status with the IRS.
• The articles of incorporation that are filed
with the state are the same whether the
corporation is a C Corporation or a S
Corporation
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MICHAEL RICHARD POWERS, LLC

9. Limited Liability Corporation
• A limited liability corporation is a legal
form of business offering limited liability to
its owners.
– It is similar to a corporation, and is often a
more flexible form of ownership, especially
suitable for smaller companies with restricted
numbers of owners.
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MICHAEL RICHARD POWERS, LLC

10. S Corporation and LLC
Similarities
1. Both are separate legal entities that are created by a state filing.
2. They offer the same limited liability protection and the owners are
typically not personally responsible for the debts and liabilities of
the business.
3. Both are pass-through tax entities – this means that the income or
loss generated by the business is reflected on the personal income
tax return of the owners.
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MICHAEL RICHARD POWERS, LLC

11. S Corporation and LLC
Differences:
1. The ownership of an S Corporation is restricted; however, a
limited liability company does not possess these same
limitations. The following are some of the restrictions
imposed by the IRS:
a. An LLC can have an unlimited number of members (owners) while a
subchapter S Corporation is restricted to no more than 100 shareholders.
b. Non-US residents can be members of an LLC while an S Corporation
may not have non-US residents as shareholders.
c. Also, S Corporations cannot be owned by C corporations, other S
Corporations, many trusts or partnerships. Limited Liability Companies are
not subject to these restrictions.
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MICHAEL RICHARD POWERS, LLC

12. S Corporation and LLC
Differences: (Continued)
2. LLCs are allowed to have subsidiaries without restriction.
3. Formalities:
a. A S Corporation requires formalities, annual meetings of shareholders and
directors are required each year and meeting minutes are required to be kept
with the corporation’s records.
b. LLCs are not required to hold such meeting; however, it is a good idea to
document major decisions of the company.
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC

13. S Corporation and LLC
Differences: (Continued)
4. A corporation’s existence is perpetual. Conversely, an LLC
typically has a limited life span. Most states require that an
LLC list a dissolution date in its articles of organization and
certain events such as the death or withdrawal of a member can
cause the LLC to dissolve.
5. The stock of an S Corporation is freely transferable while the
interest (ownership) of an LLC is not; typically the approval of
the other members must be received.
6. An S Corporation may have advantages with self-employment
taxes in comparison with an LLC. For more information on
this issue, please contact your tax advisor.
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC

14. Typical Business Structure
• The typical business structure used by
business owners toady is a single limited
liability structure.
• This structure places the asset as a separate
entity away from its owners and limits any
potential liability it may generate from
reaching the owners.
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MICHAEL RICHARD POWERS, LLC

15. Simple LLC or S Corporation
• Owner of Taxes Paid By Owners
Company Directly to the IRS
ABC
Profits Pass Directly
to the Owners
• Company
Liability Does NOT
Pass to the Owners ABC
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MICHAEL RICHARD POWERS, LLC

16. DO NOT STOP THERE!
• You have now completed 90% of the work
but only protected 50% of your assets.
• Placing an asset into a separate legal entity
only protects you from the liability arising
from the asset and is only the first step in a
multi-step process.
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MICHAEL RICHARD POWERS, LLC

17. The Next Step!
• To properly complete an asset protection
plan, you must now protect the asset itself
from liability.
• This dual protection allows you to maintain
the asset without fear of loosing it.
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MICHAEL RICHARD POWERS, LLC

18. Dual Protection
• Now that you placed the asset into a
limiting liability structure, you need to
remove the asset from the public through
the second step.
• The second step is to create yet another
limiting liability structure and have this
structure lease the asset.
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MICHAEL RICHARD POWERS, LLC

19. Step TWO!
• All assets need to be divided into two
structures. One structure that owns the
asset and the other structure that deals with
the public.
• This step should NEVER be combined with
multiple assets, but created separately for
each individual asset.
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MICHAEL RICHARD POWERS, LLC

20. Double Layer Structure
• Owner of
Structure
A&B
Structure A Structure B leases the Business
owns the and deals with the public
Building
• Building • Business
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MICHAEL RICHARD POWERS, LLC

21. Step THREE!
• NEVER forget that a name is also an asset.
• Why not place the ownership of this asset
into a separate limiting liability structure?
• Create a lease with the public structure for
use of the name with assumption of
liability.
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MICHAEL RICHARD POWERS, LLC

22. Triple Layer Structure
• Owner of
A, B & C
Structure A Structure C owns the Structure B leases Building
Owns the Business name & Business name and deals
Building with the public
• Building • Business Name • Business
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MICHAEL RICHARD POWERS, LLC

23. Example of Proposed Structure
Step 1: Sample Company Creates
“Sample Company, Inc.”
Step 2: Sample Company, Inc. Creates
three separate LLCs
Step3: The FIRST LLC owns the property
or owns the lease to the
building
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MICHAEL RICHARD POWERS, LLC

24. Example of Proposed Structure
Step 4: The SECOND LLC owns the
Name of the business. Here
we will use ‘Sample Company’
Step 5: The THIRD LLC leases the space
from the FIRST LLC and the
name from the SECOND LLC
for a term not to exceed three
years
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MICHAEL RICHARD POWERS, LLC

25. Real Estate Investment
• Real estate can be structured in the same
fundamental manner as a two step business
structure.
• When the real estate is owned by a family
the options of ownership increase slightly.
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MICHAEL RICHARD POWERS, LLC

26. Number of Titles =
Number of Structures
• Each real estate holding that has its own title
should be placed in its own limiting liability
structure:
– For a multi family dwelling, if there is a separate title
for each unit, then each unit should be placed in its own
limiting liability structure, and
– Each structure in turn would rent the use of the unit to
another limiting liability structure which would deal
directly with the public.
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MICHAEL RICHARD POWERS, LLC

27. Example
Unit 1 Unit 2 Unit 3 Unit 4 Unit 5
Unit 1 is owned Unit 2 is owned Unit 3 is owned Unit 4 is owned Unit 5 is owned
by “A” LLC by “B” LLC by “C” LLC by “D” LLC by “E” LLC
“A” LLC Leases the “B” LLC Leases the “C” LLC Leases the “D” LLC Leases the “F” LLC Leases the
Unit to “Z” LLC Unit to “Z” LLC Unit to “Z” LLC Unit to “Z” LLC Unit to “Z” LLC
who then rents it who then rents it who then rents it who then rents it who then rents it
to the public to the public to the public to the public to the public
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC

28. Family Owned
Investment Real Estate
• If the real estate in question is owned by a family,
there are additional options to limit the liability of
the asset that will also minimize tax obligations.
• The real estate in question can be owned as a
Limited Liability Partnership, and
• The LLP can then lease the property to another
company that rents the real estate to the public
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MICHAEL RICHARD POWERS, LLC

29. LLP Benefits
• Each LLP has a Managing Partner.
– This Managing Partner can be a limiting
liability structure such as an LLC
• The rest of the company is composed of
General partners.
– The General partners can be anyone.
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MICHAEL RICHARD POWERS, LLC

30. LLP Benefits
• With the proper structure, a parent/ family
member, can transfer ownership of His/Her
share of the property to other family
members at a:
1 Discount, and
2 Within limitations, without a tax liability
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MICHAEL RICHARD POWERS, LLC

31. LLP Discount
• Closely held companies are deemed by the
Internal Revenue Service as illiquid assets
– These illiquid assets are given a discount to
valuation when there is a transfer of ownership.
– Example: One can transfer $100,000.00 of
ownership and only realize a transfer of
$65,000.00 with the IRS discount.
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MICHAEL RICHARD POWERS, LLC

32. LLP Limited Tax Liability
• The IRS allows each person to transfer
property to another person in a tax free
transfer if the aggregate amount of all the
transfers for that year do not exceed
$13,000.00.
– If the person is married, that amount can be
doubled by using the marriage exemption.
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC

33. LLP Limited Tax Liability
• Combining the discount and the tax free
transfers, a person can transfer a significant
amount of money a year to another person
without paying any tax now or in the future
on these transactions.
– If the person is married, this amount can double
for the same time period
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC

34. LLP Reasoning
• Now, if the family member in question was a
parent and was the Managing Partner of the LLP,
this person can easily transfer a great deal of
wealth to younger generations without paying
taxes and still remain completely in control of the
asset, no matter how low his/her ownership
interest decreases with regards to LLP as long as
they remain the Managing Partner of the LLP.
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC

35. In Conclusion…
• The assets you have accumulated to date are
assets you worked hard for.
• Do not let the wrong asset protection structure
allow someone to take those assets.
• My office is willing to work with you in
creating an asset protection plan that not only
protects you, but also protects your assets.
LAW OFFICE OF
MICHAEL RICHARD POWERS, LLC