Asset protection is important. There are many paths to protecting assets, and putting assets in an LLC is one way to do that. There are some questions surrounding asset protection using LLC’s, though. It’s not for every situation but, in the right circumstances, it can be an extremely beneficial asset protection tool.
If my assets are in an LLC, can creditors get to them?
It depends. If the assets were transferred into the LLC after the claim was brought, then the creditors can probably reach the asset even though it’s in the LLC. This is the case because this transfer might be considered fraudulent.
If you are a member of an LLC and the claim is brought against you for actions that did not involve the LLC, then it is highly unlikely the creditor would be able to access LLC property. In addition, a creditor cannot force a member of an LLC to sell their portion or give the creditor their interest in the LLC.
What if the LLC pays me?
While a creditor cannot take your member interest in the LLC, in the circumstance where distributions are made to you, then the creditor is entitled to those distributions. The creditor can receive those distributions only until the judgment is paid in full. A creditor is allowed to do this through a process called a charging order. The charging order does not provide the creditor any interest in the LLC – only interest in the distributions made to you.
Do I need more than one LLC?
Quite possibly. If you have a rental property and decide it’s time to purchase another, do not put the second rental property into the first LLC. It is better to set up a separate LLC for each property. This creates some extra work and cost but there’s a reason to do it anyway.
If a person slips and falls causing injury and damages result, if both properties are in the LLC, then both properties are at risk, regardless of which property was the culprit of the injuries. For this reason, an asset protection lawyer, like an asset protection lawyer in Chandler, AZ, will always recommend a separate LLC for each piece of real estate.
Asset protection involves many things
It’s a common misconception that asset protection can be achieved by creating a single entity. This is far from the truth. Creating an LLC to place property in is just one component of an asset protection plan. It is supremely important that the asset protection strategy be in place prior to any claim or litigation. Spending a little time and money now will save a great deal of time and money down the road.
Contact an attorney today to see how he or she can help you properly protect your assets using numerous asset protection strategies, including an LLC.
Thanks to Citadel Law Firm for their insight into whether or not you should put your assets in an LLC.