ASSET PROTECTION FOR BUSINESS OWNERS
James C. Mulder
attorney at law
Elements of Business Asset Protection
I break asset protection down into two categories, business and personal. Both are extremely important, but each category has its own problems with its own unique planning and implementation solutions. This section will concentrate on the elements of business asset protection.
Business asset protection involves planning first. Planning includes discussing all of the issues related to the business and determining which, if any, of them cause you to sleep less at night or worry you. Once we have determined what risks you are most concerned with, then we can develop a plan that will, if implemented properly, give you peace of mind and a freedom to do things that you were reluctant to do before because of your risks. For professionals, it can mean how expensive equipment is owned and how income is paid to the professional.
Once a plan is developed it needs to be implemented with legal structures such as business organizations, trusts and contracts. Once the legal structures are created they need to be properly funded and then accounted for thereafter. This involves coordination with attorneys and accountants.
The last ingredient is to monitor the proper operation and tax reporting of the legal structures implemented.
For a business, asset protection involves breaking down the business into its economic components. A manufacturing business’s economic components can be the office building or plant, the equipment used to manufacture the business’s income producing products, rolling stock, inventory, accounts receivable, intellectual property (patents, trademarks, copyrights and other intangibles), goodwill and sometimes key employees. A service business’s economic components can be the office building, the accounts receivable, any intellectual property, valuable equipment, and key personnel. It is important to understand the current legal structures that are in place for the business. Some of the key questions or issues that need to be addressed in this regard are:
- Is it a corporation under state law and if so have annual minutes been kept up as required by Texas law?
- Is it taxed as a “C” corporation or an “S” corporation?
- If it is not a corporation, is it an LLC or PLLC, Limited partnership, LLP, general partnership or sole proprietorship.
- What will be the income tax consequences of asset protecting this business?
Once these questions are answered, planning recommendations can be made for restructuring the business for maximum asset protection. Along with the recommendations will be the income tax consequences, if any, related to implementation of the planning.
For more information on the basics of asset protection for your business or family, contact WealthKeepers today at 713.461.9699 or info@WealthKeepers.net