By Ryan Velez
You’ve likely heard about the American predilection for legal action, but it’s no myth, as 15 million to 20 million civil cases are filed every year. Small businesses and their owners are prime targets for these lawsuits, including the 3 million Black-owned businesses out there. Black Enterprise recently got some useful advice from asset protection attorney Jay Adkisson, the author of Asset Protection: Concepts and Strategies for Protecting Your Wealth. Here are some ways he shared that you can keep your business safe.
One option is using equity stripping to try and make it more difficult for a creditor to make a legal grab for your assets. This involves using liens. Adkisson explains that will be difficult for a creditor in a civil judgment to make a claim against an asset that on “paper” has little equity value due to the lien(s) that are already pledging it.
It’s also important to note that not every asset may be on the table, depending on where you live. State exemption laws exempt certain asset classes from civil judgment execution and bankruptcy settlements. These may vary, but some to look out for are real estate, retirement plans, life insurance proceeds, pensions, annuities, public benefits, tools of the trade, wages, personal/miscellaneous property, and more.
The backbone of your protection strategy is going to be basic personal and commercial insurance policies. These include adequate coverages over your vehicles, home, along with personal liability coverage in terms of personal insurance policies. For commercial policies, the general liability, professional liability, workman’s compensation, product liability, and cyber law liability are coverages that would be applicable.
Another potential idea is how exactly your business is classified. By incorporating a business, you separate personal affairs from business affairs. Business entities that fall under this category include S-Corporations, C-Corporations, and Limited Liability Companies.
Sometimes, it’s a good idea to bring on a professional to help you find ways to protect your assets, but you need to vet them thoroughly. There are many unscrupulous consultants out there who may employ methods that get you into legal and tax trouble. Adkisson warns “that research of any strategy should be conducted and asset protection planners, consultants, and representatives should be properly experienced in the area in which they are practicing.”