No matter how successful you may be, owning a business always involves risk to your assets. Despite all your work and planning, a legal claim, poor investment, or another misstep can ruin your finances. As a result, taking steps to protect your personal assets from creditors is wise. The Florida asset protection lawyers at Kramer Green can help you take the measures necessary to secure your financial future and protect against potential creditor claims.
Florida law provides various strategies that you can leverage to protect your assets from the reach of business creditors. So even if your business takes a financial hit, you still will be able to safeguard those assets and preserve your family’s wealth. Here are three major asset protection strategies that you should consider protecting your assets from business creditors effectively.
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Structure Your Business Entity Appropriately
If you operate your business as a sole proprietorship, you own all business assets personally, and your income is taxable to you personally. Legally, there is no distinction between you and your business; as a result, creditors who sue your business are suing you personally. A business creditor can reach all your non-exempt assets to satisfy a debt related to your business operations.
However, if you choose the appropriate business entity in structuring your business, you could protect your assets and prevent creditors from reaching them. For instance, if your business is a corporation, it is your corporation that generally is liable for business debts, not you personally. While there are some instances in which creditors may be able to “pierce the corporate veil” or reach through the corporation to the personal assets of shareholders and officers, the corporation, if properly set up and maintained, can help avoid this situation.
The most common business structure for asset-protection purposes is the limited liability company or LLC. LLCs are more flexible, less formal than corporations, and generally easier to set up and maintain. They also may be more difficult for creditors to pierce if set up and governed by appropriate and effective operating agreements.
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Maintain Appropriate and Adequate Insurance Policies
Running a business unavoidably exposes people to debts, accidents, and lawsuits, no matter how careful you may be. One of the best asset protection strategies is to obtain and maintain appropriate and adequate insurance policies for your business that will protect you in case of claims, litigation, or other situations in which your business could end up owing a great deal of money to someone. With insurance coverage, you may be able to prevent creditors from trying to reach your personal assets altogether. Some examples of the insurance coverage that your business may need can include:
- Professional liability insurance, such as:
- Malpractice insurance for doctors and lawyers
- Fiduciary insurance to insure those who owe fiduciary duties
- Business vehicle insurance
- Commercial building insurance and/or renter’s insurance
- Worker’s compensation insurance
- Corporate officer and director insurance
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Homestead Protection Under Florida Law
One of the best-known asset protection vehicles under Florida law is the homestead. Florida has one of the nation’s most generous homestead protection laws, and there are no value limits on it. To qualify for homestead protection, the individual must meet the following requirements:
- The individual must intend the property to be their permanent and primary residence;
- The home must be on a lot that is less than ½ acre in a municipality or less than 160 acres outside a municipality; and
- The individual must own the property individually or as the beneficiary of a revocable trust.
Under the homestead protection law, a business creditor cannot reach the homestead, no matter how the business entity is structured.
Call Us Today for Assistance with Your Asset Protection Needs
The Florida asset protection attorneys at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. offer comprehensive legal services so that we can protect your assets from the potential reach of creditors when you operate a business. However, we also offer the full range of business-related legal services, whether you are starting, operating, or dissolving your business.
As a result, we can help you navigate the complex legal problems that may occur when operating a business in the most efficient manner possible. Call us at (954) 966-2112 or learn more about our legal services online. Set up a time to talk to us about your legal needs today.