| Forming an LLC corporation makes for a wise choice. | | | | In most states, money stored inside a retirement |
| The limited liability company option minimizes your legal | | | | account is safe from most creditors, including judgment |
| liability. And the limited liability company option | | | | creditors created by worst-case-scenario lawsuits. |
| generates big tax benefits--in particular, the option to | | | | Consider, for example, the situation of O.J. Simpson? In |
| use the S corporation rules. | | | | spite of the fact that his ex-wife's family secured a |
| Businesses, their owners and investors need to be | | | | large judgment against. Simpson, perhaps his biggest |
| aware, however, that reasonable "liability protection" | | | | asset, a multi-million-dollar NFL retirement account, was |
| alternatives to the limited liability company exist. An | | | | still protected. |
| entrepreneur typically shouldn't jump into an LLC with | | | | Note: Typically states don't protect retirement funds |
| considering these other options: | | | | from all creditors--just most. For example, in |
| Liability Insurance as Alternative to LLC | | | | Washington state, child support claims can tap into |
| In some cases, additional liability insurance amounts to | | | | retirement funds. |
| a very reasonable alternative to the LLC option. To | | | | Re-title Assets |
| limit your liability as a landlord because you're investing | | | | A simple idea? You may want to transfer title of |
| in rental properties, for example, consider additional | | | | valuable assets, thereby safely putting them out of |
| liability insurance as a substitue for the limited liability | | | | danger. |
| company. | | | | As an example, and ask your attorney about this, but if |
| You can often buy tons of liability insurance for a price | | | | you're married and one spouse engages in a risky |
| that's less than the annual fees and franchise taxes | | | | profession or business, you may want to have the |
| that some states charge for registering a single limited | | | | other, more safely-behaving spouse own the family |
| liability company. For example, you may be able to | | | | home. |
| purchase a five-million-dollar personal liability umbrella | | | | Behave More Safely and Simply Accept Left-over |
| policy for far less than the state of California charges | | | | Risk |
| in annual LLC franchise fees. | | | | One final but often overlooked alternative should be |
| Retirement Plans as Asset Protection Tools | | | | mentioned. You can significantly reduce your legal risks, |
| Another option for liability protection? You can often | | | | logically, through cautious behavior. You might avoid |
| segregate the wealth you need to protect inside | | | | risky situations, people and activities, for example. |
| "buckets" that are themselves extremely safe. For | | | | Cautious behavior, in and of itself, may so reduce your |
| example, to protect your investments and that's why | | | | legal and business risks in a venture so as to make the |
| you're isolating other risky assets or activities inside an | | | | remaining risks immaterial--or at least immaterial if |
| LLC, you may want to look at the idea of storing your | | | | you're adequately insured and if you're segregated |
| investments in a retirement account that is itself a | | | | some assets away into "armored" containers like |
| form of protection. | | | | retirement plans. |