LLC’s Are Good, But Not Enough
Look, I set up LLC’s for my clients. They’re great! They are what I normally recommend for any kind of a business entity. But, most business people who have LLC’s, they think that’s that. “Okay, now I’m protected. My business is protected. I’ve got everything set up. Great!” Well… halfway.
You are protected, yes. But, your business isn’t. The protection that an LLC gives you is “one-way” protection. If your LLC is sued, or if your LLC has creditors, all they can do is get the stuff in that business – in the LLC. They cannot pierce through that protection and get to you. (Unless you screwed it up somehow, but save that for another discussion.) If you have an LLC, you are protected – from your LLC, but your LLC itself is not really protected. There’s nothing protecting the LLC in the other direction.
“Two Way” Protection
There’s nothing protecting what’s in your LLC from you – from your creditors. So, if you are personally sued, if you declare bankruptcy, if you personally have creditors that are after you for money, your LLC is an asset they can grab. They can get your stuff, and they can get what’s in the LLC.
So, how do you prevent that? You use a trust. You set up an irrevocable trust that owns the LLC. Then, you’re protected from the LLC and the LLC is protected from you! If you have a business that you want to protect for your children, that’s the way you would do it. There are some complications, but it’s nothing that we can’t walk you through. If you’d like help setting up a double wall of protection with your LLC, give us a call and we’ll set up a time to chat about it.