Before starting a business, you must know which business formation fits best with your operations and management directions. You have a concept in mind, and your entity should represent it accordingly. However, businesses can face legal liabilities and financial hardships throughout their lifetime. If something adverse happens to your company, you want to safeguard your personal assets from creditors and seizure. Fortunately, a limited liability corporation (LLC) can allow you to do just that.
What is an LLC, and how can it protect your assets?
An LLC is a business formation that limits an owner’s personal liability. It creates a barrier between the business liabilities and the business owner’s personal assets. The laws distinguish LLC owners and the LLC as separate persons or entities. Therefore, if a business creditor sues an LLC and wins, they still have no right to claim the LLC owner’s personal property, including the owner’s bank accounts. If someone sues the LLC owner personally, they cannot target the business assets.
When setting up an LLC, timing is key. The business owner should have already set up the LLC before incurring the debt. They should ensure their company has separate business and personal financial obligations, meaning all the company’s financial records should be separate from the owner’s personal financial records. Also, even though Nevada has some of the best laws regarding LLC formation, business owners should still take extra safety measures.
Strengthening your protection
An LLC can be a valuable tool in any asset protection plan, especially in Nevada, where business owners and investors can obtain protection from an LLC business structure. But business owners should also consider incorporating other tools such as insurance and asset protection trusts to further bolster their asset protection plan.
An LLC can protect your assets and your business assets, but it does not mean it is easy to set up and maintain. Business owners should keep their LLC status active and consider adding a Nevada Asset Protection Trust as a second barrier for extra protection.