An entrepreneur or a regular citizen is always under threat of getting sued. There are so many instances when a person can get sued that most people have taken steps to prevent them from getting stripped bare when a lawsuit occurs. Below are some tips on how to protect your assets when getting sued.
- When you are operating a business as a sole proprietor and it has grown considerably, consider incorporating your business. As a sole proprietor, most of your assets will be tied to your business. In the event of a lawsuit and you lost, all of your assets and your business may be included in the settlement. Incorporation removes your personal properties and finances from being tied up to your business, therefore the business will be a separate entity and will only be the one that will be involved in case you get sued.
- If you own several properties, consider distributing them among your trusted next of kin. This will limit the assets that are directly under your name. You can place some of your properties under your children’s names, your parents and some to your wife. There may be some lawsuits where you and your wife may be jointly responsible but distributing your property ownership will at least remove the risk of having all your properties taken.
- If you are operating a large business concern, one way to protect most of the valuable assets of your company is to create a holding company, which will own these assets. This will separate the business concerns with the business assets, which in paper will be leased to you, rather than owned by you. This limits your liability when you and your business are named in a lawsuit.
- Check if community property laws apply in your state so that you can have properties transferred to your wife as gifts. When this happens, the assets will be considered jointly owned by you and your wife that will insulate the properties when a lawsuit is file against you and your business.
- Consult your attorney if tenancy by entirety is applicable in your state. This means that the house where you reside is jointly owned by you and your spouse, which will protect this asset in case of business or personal lawsuits. Since the house belongs to you and your wife your house cannot be included to in the lawsuit.
- Establishing your business in a foreign country and operating an office in your home country is another way to protect your assets. The foreign company will be allowed to buy some property and cars in your home country but will limit the assets that can be acquired. Therefore when you get involved in litigation, the assets involved will be very limited unless the interested party wants to take the litigation overseas.
- Protect your assets and business by getting adequate insurance to cover foreseeable lawsuits. This will protect you and your assets from getting seized because the insurance will be able to cover the indemnity required in case of a lawsuit. Although this can be limited and in some cases restrictive and more expensive, comprehensive insurance can take care of some of the financial burdens when a lawsuit is filed against you. Be sure to check all the options that are available.
When operating a business, plan for the eventuality of a lawsuit so you can better prepare for it. Consult an expert in business law so that you can cover all the angles that are usually included in business lawsuits. You should also get advice from an attorney who is an expert in real estate and asset protection.