Pay Lower Legal Fees to Protect Your Business Assets Now

The asset protection laws in the State of Florida are some of the nation’s most liberal and debtor-friendly. Coupled with the lack of state taxes and employer-friendly laws, whether a business will be home-based or is aiming to become a Fortune 500, businesses are attracted by the thousands to launching in Florida.

Eric Lanigan and Roddy Lanigan work with businesses of all sizes to protect them from the destruction of creditors. The prime time for this to occur is before the business is incepted. However, anytime is a good time to protect assets. Consult with an attorney to plan your business structure to properly protect your assets.

What is often left out of the business plan is the asset protection, the legal assurance that the business owner’s assets are safe from creditors. It’s interesting because the entire idea behind asset protection is planning ahead to protect personal assets and business assets in advance of any legal problems.

Asset protection is the legal planning for separation of business and personal assets from creditors in a lawsuit. Every business plan should account for asset protection at the front just as it plans for insurance, investments, taxes, advertising, sales, employees, etc.

Business owners do not want to incur legal fees to create and maintain a legal entity. However, in addition to other advantages, conducting business through a legal entity may offer substantial risk management benefits.

The legal advantage of operating a small business through a business entity instead of an individual sole proprietorship is that the business entity can shield the individual owner against personal liability from business creditors and protect the owner’s personal assets.

In a properly organized and capitalized business entity, the individual owners are not responsible for the entity’s debts and other risks. If the business breaches an obligation or causes injury to a third party, only the business and not the owners is legally responsible.

In the case of a sole proprietorship, general partnership, or trust the owner, partner, or trustee, respectively, has unlimited liability for debts incurred in the business.

Many entrepreneurs operate their businesses as sole proprietors rather than through a legal entity, such as a Corporation or a Limited Liability Company. Whether their business is home-based or in the Fortune 500, these business owners are attracted by the informality of sole proprietorship.

They also do not want to incur legal fees to create and maintain a legal entity. However, in addition to other advantages, conducting business through a legal entity may offer substantial risk management benefits.

Just be aware that in no way is asset protection and planning is not a criminal activity.  Asset protection is the implementation of a plan to legally protect wealth and assets from any creditor.  

The use of asset protection planning is subject to the Uniform Fraudulent Transfer Act that was incorporated in Chapter 726 of the Florida Statutes.  It is important that you seek the direction of an experienced attorney to prepare any asset protection plan.

Tenancy By the Entirety

Florida also has what is known as tenancy by the entirety which is a form of ownership of assets between a husband and wife.  Similar to a joint tenancy with right of survivorship in that the asset will automatically become owned by the surviving spouse upon the first death without having to go through probate.

Tenancy by the entirety has the additional feature of protecting the entire asset from the creditors of only one spouse.  Only if a particular debt is owed by both spouses can the creditor attach levy upon and sell tenancy by the entirety property.

Tenants by entirety is a special form of joint tenancy ownership which is available only to married persons. In Florida, ownership of property as tenants by entireties or TBE affords broad asset protection benefits during the lifetime of the husband and wife and is the quickest and simplest method of asset protection for married persons.

Florida Homestead Exemption

Provision limits to the homestead protection available in bankruptcy if the Debtor has not owned his or her home for more than 1215 days (three and one-third years). Until that ownership period has been reached the homestead exemption is limited to $146,450.00. This amount is adjusted periodically.

A well-constructed Florida asset protection plan can allow you to shield your assets from  a frivolous lawsuit, mortgage foreclosure, creditor claim, or other attack on the estate you’ve worked so hard to build. It may involve any or all of the following elements:

  • Offshore Corporations and Trusts

  • Life Insurance

  • Annuities

  • IRA

  • 401(k)

  • Federal Sponsored Retirement Plans

  • Auto: Florida residents may protect up to $1,000 of equity in an automobile

  • Florida Irrevocable Trusts

  • Florida Corporations (In limited situations)

  • A Family Limited Partnership

  • A Limited Liability Company

  • Joint Tenancy Property (But a creditor of both spouses CAN attach an asset)

  • Lifetime Marital Trusts: A spouse can create by gift a trust for the sole benefit of a spouse for the remainder of his or her lifetime. To qualify for an unlimited marital deduction for gifts, the trust must require that all income be distributed annually to the spouse.

  • Prepaid College Plans: Florida prepaid college tuition and college saving plans are protected from creditors by Florida Statute

  • The Florida Homestead Exemption

LLC Protection From Creditors

If a person owns an interest in a family limited partnership or a multi-member limited liability company, then the creditor’s only avenue to obtain funds is through a charging order. This allows the creditor to receive distributions as they are made from the partnership or the LLC.

But a creditor can’t force distributions to be made nor does the creditor become an owner of the entity. In many cases this will frustrate a creditor. In a recent statutory change, an irrevocable inter vivos trust for the benefit of the spouse that then continues for the benefit of the original grantor spouse is protected from the grantor spouse’s creditors.

The ownership in an LLC is protected by LLC law. A creditor can’t just take over interests in an LLC the way they can take control of shares. With LLC ownership, a creditor has very limited access to the LLC’s profits–in many states no access to its assets. Even in states where it is possible for a creditor to gain control of an LLC’s assets, there is a lengthy court fight ahead.

Some cases have even been successful in getting judgments that destroyed the corporate shield.  These cases often utilized extended litigation and caused significant economic damage.

The corporate laws of many states, including Florida, extend corporate liability to officers and directors under certain circumstances. Shareholders, governmental entities, and business associates are starting to use these claims early in litigation to gain settlement leverage.

Statutory Exemptions From Creditors

Included in Florida’s liberal asset protection laws are numerous statutory exemptions. However, these benefits are only available to permanent residents of Florida. Statutory exemptions include but are not limited to:

  • Disability Income

  • Wage or Salary

  • Exemption for IRAs, Pension Plans, and Profit Sharing Programs

  • Life Insurance Policy

  • Automobile ExemptionOther Miscellaneous