Asset Protection Strategies
Studies show that each year 1 out of 4 individuals who make over $50,000 per year will be sued. Unfortunately, these days it is hard to predict what will happen if you find yourself in court. Legal fees can be costly even if you win or end up settling out of court.
One of the best Asset Protection Strategies is to be absolutely poor. Have nothing that anybody can get. Of course, none of us want to be poor, but you can arrange your affairs to appear as though you are. All of which is done by legal and above-board means, which you should do BEFORE anything happens. Too many times people will wait until they have been sued before they look in to setting up an asset protection strategy. Often it’s too late for them and they find themselves facing the possibility of having to start all over after years of hard work and sacrifices.
ISSUING LOANS TO YOUR HOME STATE BUSINESS
One way to accomplish this is to have your Nevada Corporation make a loan to your home state business. You could use a promissory note, which is due on demand as one example. Since there are no usury laws in Nevada, your corporation could charge any amount of interest. However, you should keep the interest rate at what would be considered “reasonable”. That is, within a few interest points of the current lending rate. The loan is then made, and of course, your home state business would secure the loan with the business assets. The Nevada Corporation would then place liens on the assets (usually via UCC-1 filings for equipment and Deeds of Trust for property). Since the promissory note is due on demand, if it became necessary, the Nevada Corporation could take possession of the assets.
It’s important to make sure that you have a paper trail for your loan.
EQUIPMENT LEASING
Another way is to have the Nevada Corporation lease property or equipment, etc. to your home state corporation (also a deduction). Then the home state business does not own those assets. Heed the expression “Don’t carry all of your eggs in one basket”. Spread them out, keep them separated and protected.
ISSUING STOCK IN THE FORM OF A LOAN
As discussed previously Nevada allows stock to be issued for anything. It’s up to the Directors to decide what they will issue it for. In fact, stock can even be issued in the form of a loan. You may put up the equity in your home and/or other properties as collateral as well as equipment. Again UCC-1 filings would be done for equipment and a Deed of Trust filed on property.
The key with an Asset Protection strategy of this nature is to not have your name on the Nevada Corporation that is placing the liens. Remember, it is important to make sure that you have all of the necessary legal documents to validate any transactions. This is one mistake that’s often made. A paper trail is your proof that it’s a valid transaction.
