November 10, 2020 Dane Kent

ASSET PROTECTION FOR BUSINESS OWNERS

BY DANE KENT

asset protection for business owners

 

A commonly held misconception among small-medium sized business owners in the U.S. is that having a corporate structure in place will protect their assets to the full extent and that no further measures are required.  However this has been proven time and time again to be drastically inaccurate. While company laws purport to protect business owners from liabilities incurred by the companies they own, a recent decision by the US Court of Appeals for the Second Circuit has held that the CEO can be held vicariously personally liable for the acts of others in his or her company. The trend is to pierce the corporate veil and hold shareholders responsible for liability claims arising at the corporate level.

The following statistics paint a clear picture of the current legal environment for small-medium sized businesses and their owners:

  • 75% of small business owners in America are worried that they may be the target of a frivolous or unfair lawsuit.
  • Small businesses pay $20 million out of their own pockets per year in tort liability costs.
  • An average small business earning $1 million per year spends $20,000 on lawsuits each year.
  • Since 1950, U.S. tort costs have grown more than the GDP.
  • The Klemm Analysis Group estimates that as many as 52 percent of all civil lawsuits target small-medium sized businesses each year.

When these impending lawsuits arrive it is vital to have an effective strategy in place to prevent the extensive loss of personal assets. Asset protection is therefore of critical importance for the owners of small-medium sized businesses in the U.S, given the incredibly high levels of liability they, and their businesses, face.

With the above in mind it is imperative to take precautionary steps as early as possible to safeguard yourself against potentially massive damage. Having an International asset protection trust in jurisdictions such as the Cook Islands or Nevis offers an ironclad level of security and peace of mind. An asset protection structure of this nature can diminish exposure and protect personal assets from unforeseen future creditors. To learn more about the benefits of such structures please read ‘A Beginners Guide to Offshore LLCs & Trusts’.

Along with the traditional asset protection and wealth preservation aspects that an offshore trust provides, various other benefits arise, including access to investment advisory and private banking specialists in foreign jurisdictions. To gather more insight about the benefits of offshore banking, one of our recent articles titled ‘Opening an Offshore Bank Account’ provides an excellent summary.

With 2020 having been one of the most unsettling and unpredictable years in recent memory small-medium sized business owners face an almost endless array of potential new and unique angles from which they could be targeted. There is no better time than now to consider your options. In the realm of asset protection timing is key and the effectiveness of an asset protection structure dramatically decreases after a creditor’s cause of action has accrued.

With almost 40 years of experience, Southpac can assist you in establishing an asset protection structure that will help shield you from personal liability. If you wish to request more information please Contact Us.

 

 

Dane Kent

Dane Kent is Client Manager at Southpac Group. He is responsible for managing and building client relationships.
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