Asset Protection | Law Office of Kevin Pritchett, Inc.

Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here
Business Structure Part I”Which Business Entity Structure Is Right For You?”
     As you can see from the chart above the answer to the “which entity structure’ should I use?” question is REALLY about…..

TAXES
     More specifically, saving taxes. Also

PERSONAL LIABILITY

Starting with this newsletter, I will explain each of the business structure types revealing the pros and cons of each focusing on taxes and personal liability.

    Today, I’ll begin with ‘Sole Proprietor’ structure. Don’t worry…you won’t have to be a CPA or Tax Geek like me to understand…I’ll keep it super simple and common sense…fair enough? Let’s dive in.

Sole Proprietorship (SP)
SP is the most basic way to conduct
business. You conduct business in your own name (even though you can and should register your sole proprietor business with a dba or ‘Doing Business As’ registration with the County Clerk where you conduct business.

Pros of SP:
==organizing business activity separately
==inexpensive and simple to start==no annual meetings
or other corporate formalities
==limited business tax write offs

Cons of SP:
==not able to claim totality of available business
deductions
==no personal asset protection…i.e. someone   can sue
your SP and ALL your personal assets   not just the SP
assets are at risk

Take Home Message For SP
A SP is how many people begin operating
business because of its simplicity and low cost.

     However, in my opinion (and in my over 30 years of legal practice) the cons of personal liability and limited tax deductions clearly outweigh the cons.

   Next time, I’ll go over the different types
of corporations and other entity options.

Reach Out To Me If You Have Questions.
If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957
ironkop@gmail.com
www.KevinPLaw.com

Just south of ‘Sawmill Creek…..

Hi Attorney Kevin Pritchett here

Your Chances of Being Sued
Americans have a 10 percent chance of being sued
in any given year and a 33 percent chance of being
sued in their lifetimes, according to IFG Trust Services Inc., an international investment firm

Common Mistake
Problem is there’s a LOT of misinformation about the best ways to protect yourself.

For example:
Mistake
==you should put your investment real estate in your personal Trust…WRONG.

Correct Answer:
Investment property should be in separate entities, Sub S corporations and Limited Liability Companies Reason, if anything happens in your investment properties or your business, any resulting liability will be ‘stopped’ at your entity….

      In other words, if your personal assets and your business assets are all lumped together, any liability from your business or investment activity could be assigned to your personal assets…and as a result EVERYTHING YOU OWN COULD BE AT RISK…..not just the business asset where the event occurred.

A Trust is NOT An Asset Protection Instrument
     The other HUGE mistake I see people make is the belief that a Trust of ANY sort is an asset protection instrument….A TRUST DOES NOT PROVIDE ASSET PROTECTION…PERIOD!!!

Trusts are estate planning and probate avoiding instruments. THEY DO NOT PROTECT YOUR PERSONAL ASSETS FROM LAWSUITS…

What You Need To Know About Asset Protection
Entities (sub S corps, LLCs, C corps) provide limited liability asset protection. Meaning any liability you may incur while operating in one of these entities is ‘limited’ to your investment in that entity…and does not spill over into your personal assets that are outside of the entity.

Example
Say for example you owned investment real estate, an apartment building. And let’s say you also owned $500,000 in stocks and savings, jewelry, a personal home a vacation home, cars, a boat, expensive art and let’s say a valuable piece of land in another state.

Let’s also say there’s an accident in your apartment building and someone dies. Let’s assume your property insurance has reached its limit and after a long lawsuit there is a judgement against you for $1,000,000 over and above what your insurance covers.

If you owned that apartment building in your personal name ALL YOUR ASSETS listed above could be attached and at risk in that lawsuit.

On the other hand, if the apartment building was owned by an entity and operated correctly (there’s the trick and the subject for another article….) your liability would be LIMITED to what that entity owned…and not be extended to all your other personal assets…make sense?
Your investment activity should be operated in one of these entities.
On the other hand….Trusts (Revocable, Irrevocable, Charitable Remainder et al )DO NOT PROVIDE ASSET PROTECTION and are for Estate Planning and Estate succession planning.

Got it??? Good
If you have comments or questions post them below and I’ll be sure to answer them!!

Remember…..”Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
www.KevinPLaw.com
ironkop@gmail.com
312-505-1957
www.KevinPLaw.com

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Business Structure Part 1: ‘What Business Entity Structure Should You Use?’

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