1. By Ward J. Wilsey, JD, LLM
3655 Nobel Dr. Suite 345
San Diego, CA 92122
(858) 764-2672
wardwilsey@wilseylaw.com
The Wilsey Law Firm www.wilseylaw.com
Asset Protection for Business Owners

2. Protecting Business Owners
Insurance
Business Agreements
Entity
Segregated Business Ownership
Qualified Plan
Captive Insurance Program
Domestic and Offshore Asset Protection Trusts

3. Insurance
Typical Client
Any small business owner
Reasons for Insurance
Protection
Bank Mandate
Types
Mandated
Unemployment and Social Security
Workmans Compensation
Optional
Employee
Customers
Operation

4. Reasons for Insurance
Payment of Claims
Excess Liability may not be covered
Lawsuit Plaintiff may be willing to settle at policy limits
Legal Fees
Insurance company does not want to lose!
Requirement for Doing Business
Bank loans
Malpractice required for insurers

5. Employee Insurance
Health Insurance
Disability Insurance
Employment Practices Liability
Key Employee
Disability
Life

6. Customer Insurance
Liability
Premises
Auto
Employee
Umbrella

7. Business Operational Insurance
Business Interruption Insurance
Business Property Insurance
Key Employee
Life Insurance

8. Business Agreements
Shareholder and/or Partnership Agreement
Buy Sell Agreement
Funded with Life Insurance or Liquid Assets

9. ENTITIES

10. Types of Entities
Corporations
Limited Liability Company
Limited Partnership
Professional Corporation
Limited Liability Partnership

11. Client Profile
If client has no other assets
Business makes over $100,000 per year
Business has liability other than that imposed by owner
If client has assets
Entity should always be used

12. What Entities Protect
Entities Protect Against
Liability of Employees
Liability of Other Owners
Liability of Premises
Contractual Liabilities
What Entities Do Not Protect Against
Liability of Self

13. C-Corporation
PROS
CONS
Oldest Type of Entity
Most case law
Limits Liability
Possible Tax Benefits
Possible Self Employment Tax Savings
$800 annual fee from California
Possible Double Taxation, especially for successful companies
Capital Gains for Real Estate Transfers

14. S-Corporation
PROS
CONS
Same Limited Liability Benefits as C-Corp
No Double Taxation
$800 annual fee from California
Capital Gains for Real Estate Transfers
Lack of some Fringe Benefits like C Corp
Limited to 75 Shareholders
Shareholders must be Citizens or Resident Aliens

15. LLC
PROS
CONS
Flexibility
Lack of Formalities
No Double Taxation
No Real Estate Transfer Taxes
Possible Charging Order Protection
$800 Annual Fee
Gross Receipts Tax

16. Limited Partnership
PROS
CONS
Flexibility of LLC
Lack of Gross Receipts Tax
$800 Annual California Fee
GP required
GP has liability

17. Professional Entities
Limited Liability Partnership
Accountants, Attorneys, Architects
Similar to Limited Partnership
Used more often by Accountants and Lawyers because Partner historically has more prestige
Professional Corporation
Simpler

18. Segregated Business Ownership

19. Segregated Business Ownership
Reasons
Remove Liability from Acts of Partners
Avoid Being Drawn into Lawsuits
Consider forming corporation to make loans to businesses instead of outright ownership
Possibly convertible debt
Remove Ability of Creditors to go after assets of company
Instead, form separate entity to own assets, have those assets rented to main entity
Equipment
Receivables
Possibilities are endless

20. Use of Qualified Plans

21. Qualified Plans
Tax Deductible Asset Protection Strategy
Bankruptcy
ERISA style plans receive unlimited protection
IRAs (Traditional or Roth) receive up to $1,000,000
SEPs are not subject to limitations
Rollovers are not subject to limitations
Non-Bankruptcy
only protected to the extent reasonably necessary for the support of the debtor and any dependent of the debtor

22. Types of Qualified Plans to Explore
IRAs
Roth IRAs
401Ks
Simple and SEP IRAs
Traditional ERISA Plans
412(i) Defined Benefit Plans
419A(f)(6) Employee Benefit Plans
419(e) Welfare Benefit Plans

23. Captive Insurance
Insurance Company formed by client to provide risk coverage
Operating Company pays premiums to Insurer, who in turn insures the Operating Company
Premiums can be structured to be tax deductible
Half of U.S. states have captive enabling statutes
Most popular jurisdiction is Vermont
Does not have to be offshore, although Bermuda is a popular choice
Irrevocable Trust could own captive
Move money outside of the clients estates
Best for larger businesses paying over $200,000 a year in premiums

24. Asset Protection Trusts
Domestic or Offshore
Control can be maintained via the use of clients entity
Just transfer percentage of business to Domestic or Offshore Trust
Distributions from company now are distributed to Asset Protection Trust
Result is that those distributions are protected from creditors
Poor mans version can be done for married couples using Family Gifting Trusts
Reduces costs