Starting a business is a risky endeavor. You put your assets, sweat, and heart on the line in hopes of providing a product or service that will benefit society and help secure your financial future.
But where there is money being made, there are always liability risks. And good business practices are not always enough to eliminate this risk. Where these practices fall short, asset protection planning can provide the fill in the gaps and provide substantial (if not complete) protection.
A series LLC might be right for you if you own multiple real properties.
Regardless of your business' goals, needs, and risk tolerance, Nevada is one of the most business friendly states in the nation and has many advantages, including a wide selection of numerous types of business entities.
How to Protect My Real Estate
Real estate can be a good investment, but one that comes with a host of risks and liabilities. If your properties are titled to a person and not a business entity, you are personally liable for damage or losses that may arise from accidents, injuries, interruptions to business or other events.
If one or several of your properties is involved in a lawsuit, your personal assets are at risk, including cars, home, bank accounts, other real estate investments and more. However, you can protect your assets by placing your properties in business entities to create a barrier between you and your assets. This makes it more difficult for a judgment creditor to pursue your personal assets in the event of a lawsuit involving your investment property.
How to Protect My Equity in Business
Using holding and operating companies is an asset protection planning strategy that helps to limit liability risks in your business structure. An ideal business structure consists of an operating entity that does not own any vulnerable assets and a holding entity that actually owns the business's assets. With this structure, the small business owner can eliminate (or, at the very least, substantially limit) liability for both business debts and personal debts.
Asset Protection for Medical Professionals
We understand that it is a tremendous risk to put all of a practice’s “eggs” into one basket, but what’s the solution? For your practice, it may be as simple as using multiple baskets. In fact, using multiple entities to run a practice is quite common in many types of business outside of medicine.
This turns your business into a fortress—shielding different business units or assets from claims against other businesses or assets. If one location performs poorly or there is a lawsuit at one property, the owner does not want the other locations to be held responsible. Doctors can use the same tactic in the same way and for the same reason.
Trump Tax Plan
The House of Representatives passed the "Tax Cuts and Jobs Act of 2017," (Trump Tax Plan) on December 20, 2017. It's the biggest piece of tax legislation since Ronald Reagan's Tax Reform Act of 1986.
The new tax bill makes small decreases in tax rates for most brackets for individuals, but creates much bigger savings for corporations, including the elimination of the corporate alternative minimum tax. Small businesses implementing a pass-through tax strategy will also find significant savings. So will businesses with significant income generated outside the United States.
Which Entity Is Best?
Every business is different. They vary in their goals, start-up costs, overhead, investor interest, financial backing, and risk tolerance, just to name a few.
There is no one-size fits all approach to selecting the best entity for a business. Options range from a sole proprietorship, which is simple, easy, an inexpensive, but provides no shield for personal liability, to a complex system of multilayered business entities designed to provide maximum personal liability and minimum tax liability, to everything in between.
Nevada v. Other States
Last year, the Trust Advisor polled its readership by asking which trust state is best. The only choices allowed by the poll were Alaska, Delaware, Nevada and South Dakota. Nevada won with 64 percent of the vote, followed by Alaska with 15 percent, South Dakota with 11 percent and Delaware with 10 percent. This poll dealt with all aspects of trusts, not just dynasty trusts.
The Nevada legislature has pushed over the last several decades to make Nevada more friendly to businesses and more attractive to those looking for tax advantages, structures, and laws that promote instead of stifle business. Fortune magazine concluded, "Nevada’s attraction is that it has one of the lowest costs of doing business in the West."