Protect Assets From Creditors in California

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Everyone who opens a business does so with the intention of making a profit, so why do so many businesses in Fremont, Livermore, and elsewhere end up failing?

Even worse, almost any holiday party or barroom bull session will involve someone telling a story of how his long-standing financial woes began with a bad business decision. The fact that businesses sometimes fail to make a profit and have to close is just a normal part of capitalism, but no oneís personal financial situation should be ruined because of a business failure. The best thing
that business owners in the East Bay can do to avoid this problem is too seek professional legal advice regarding asset protection, and to do it now, rather than before the big financial problems start.

What Is Asset Protection?

Assets are anything you own, including money and other types of property. Assets can belong legally to you or to a business entity. When a business closes, it liquidates (sells) its assets and uses the money to pay as many of its debts as it can. If the money is not enough to settle all the debts the business incurred (and it usually isnít, or else the business would not have closed), creditors will come after the business ownerís personal assets, if they can, to pay the remainder of the debt. Through asset protection, business owners can avoid having to use their personal assets to pay business debts.

Asset protection often takes the form of setting up a business entity to keep the assets of the business separate from your personal wealth. The differences among the various types of business entities have mainly to do with taxation and with what kinds of asset protection they offer. The limited liability company (LLC) entity designation is especially popular for the asset protection it offers.

When to Set Up a Business Entity for Asset Protection

The time to think about asset protection is now, before you even start your business. You will need asset protection structuring if the business closes, but you will also need it if your business becomes a party in a lawsuit. Likewise, business asset protection can reduce your financial losses in a divorce, but donít wait until your marriage is in trouble, or even until you get married, to think about asset protection.

Business & Corporate Law attorneys keep asset protection in mind whenever they help someone establish a business.

James H. (Jim) Gulseth was born and attended high school in Devils Lake, North Dakota and graduated with an A.B. degree from the University of California at Berkeley. He earned his JD degree at the University of California Hastings School of Law in San Francisco. He is a member of the Corporations, Business Transactions, Securities and Tax and Intellectual Property Sections of the State Bar of California and is a member of the State Bar of California, the Alameda County Bar Association, and a member and past President of the Eastern Alameda County Bar Association.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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