Protecting Your Assets During a Credit Crisis! by Scott Letourneau

Scott LetourneauNow is the best time to take an inventory of your levels (not level) of protection in your business today.  As the economy continues to crumble all around us… I, like most, hope it gets better but with the credit card industry likely to become the next full scale foreclosure crisis, hurting banks even more, and limiting the consumers ability to purchase… I see us in for a long road ahead before any recover happens. Consumer credit card losses alone are expected to be over $100 Billion in 2009 (it was $25 Billion in 2008).

With that is a lot of opportunity for those to accumulate net worth or for many of you to keep what you have left.

One of the big problems I foresee is the massive increase of lawsuits at every level. Most people in the time of stress will find someone to blame for their lack of financial success vs taking accountability and finding solutions to move forward. NULL

As more and more people stay unemployed, anticipate more layoffs coming, as financial stress continues to rise, one solution is to sue those who have money or the perception of money! That may be you! With that being said, it is the best time to take an inventory of your levels (not level) of protection you have in your business today. Even if things are slow in your business, never put all your financial eggs, in one basket! Here is my concern, if you have more assets to protect, but you wait 6 months or one year, it may be too late. One lawsuit, even if you are incorporated or form an LLC, at the entity level if that is responsible for all your revenue to support both your business and family, could destroy your entire financial operation! What Happens if Your Business is Sued Directly? The first step of course is to form an LLC taxed as an S corporation for your network marketing business. It makes more sense to do that as you start your business to also help separate your business and personal credit. Most inadvertently negatively affect their ability for their business to maximize business credit (cash in this case) because as a sole proprietorship as you self finance your business more than likely you are driving up your revolving debt levels. That is the wrong approach!

The key is to keep your personal revolving debt low and get a business credit card in the name of your LLC and use that.

Most forget that because they form an LLC or a corporation they have separated their personal and business liability and therefore they are protected. That is the first step. You still have the problem if your business gets sued and you lose the assets in your business (assuming your insurance does not kick in to cover everything, hopefully you have some type of insurance coverage at your business level). If you have an operating business outside of network marketing business you may want to consider separating both streams of revenue. It is not required, but for many it may be a great option.

It is also important to separate safe from risk assets. Any assets outside your retirement plan can be set up in a separate LLC.

Remember, your living trust will not protect your assets from liability! As you may know having an LLC over a corporation provides a layer of protection called the “charging order”, which basically makes it more difficult for any plaintiffs to get to your ownership interest in your LLC. I will not go into more detail on this part as I have already covered in past newsletters. The important points to consider are the following: If you have an LLC that has substantial gross revenue and profits with a partner (I know that definition will be different for everyone) but let’s say you have $1.5 million in gross sales with $600K in net profits. Especially with a partner you may want to consider each partner to have their own individual LLC to provide an extra layer of protection in case the owners get sued for something unrelated to the operating business. Even though the charging order will provide a road block, it can be very disruptive to the operating business if your partner is sued or goes through a divorce personally. If you have other C corporations and there is value in the company consider forming an LLC to own the stock, a safe asset. Hopefully, you do not have S corporations with value in them. If so, a single member LLC is your only option to help. Or form another entity with more protection to take over future business which would be an LLC taxed as an S corporation. Of course, speak with your professionals on all the other tax and legal issues that may come up. All network marketing magazine subscribers receive a free consultation when you call Nevada Corporate Planners, Inc. at 1-888-627-7007 and we will walk you through all the fees and services. You will have the option of either having us form the LLC in your home state or Nevada and foreign register. When you call we will explain the difference both in strategy and fees that will best fit your situation. Ask us how we can help your business gain access to business credit also!


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