One of the downsides of being a real estate investor is your vulnerability to law suits for injuries that happen on your property. A study released by the Pacific Research Institute estimates that approximately 15 million civil lawsuits are filed each year in the U.S, which costs litigants over $250 billion. Of these suits, at least one-fifth are torts filed as the result of someone suffering injury or loss. While forming an LLC is an effective way to protect your personal assets, it must be done correctly if you want to be fully covered. Location is a major factor when setting up your LLC, because each state has its own statutes and laws. Hiring an experienced asset protection expert is an important step in making sure that your assets are bullet proof.

Single Member vs. Multiple Member LLC’s

Because of tax laws, some states are better than others to establish an LLC. Researching the parameters for asset protection within your state is a good place to begin the process of protecting your business. For example, Florida treats multiple member LLC’s differently than they do those with single members. In a 2010 case, the Supreme Court ruled that creditors can legally seize the company stock of a single member of an LLC in order to satisfy personal debt. Because the FTC transferred that individual’s interest from the company into its own name in order to satisfy a judgement, the other LLC members were not affected. Utah is another state with similar regulations and remedies in place.

While this particular example was specific to Florida, there are more states on the verge of adopting these laws. An LLC with multiple members is a safer way to protect your assets than a sole proprietor situation where the owner can potentially be seen as an alter ego for the company by the courts.

Be More Confident With Asset Protection

If you own a business property, you are legally liable for anything that happens on your premises, regardless of who is at fault. For instance, in 1997, the owner of bar in Illinois that had been the target of several break-ins, set electric booby traps on the inside of each window. Despite clearly placed signs warning trespassers of the anti-theft system, a man attempted to break in and was killed when he was electrocuted. After a long and stressful court case, it was ruled that the owner of the bar was liable for the burglar’s death and ended up being ordered to pay out over $70,000 to his family.

While the above case is on the extreme end of the tort range, it is a good example of the level of protection business owners need when it comes to their assets, regardless of circumstance. Investors with significant portfolios should look into a qualified asset protection when they establish their LLC. Because there have been a rash of asset protection scams on the market, you may have shied from such programs in the past; however, financial experts suggest that it is possible to ensure that you have chosen a good plan and a genuine one can be a valuable benefit. For instance, legitimate plans contain a threefold process, such as tax reduction strategies, estate planning and lawsuit protection, in addition to one-on-one support throughout the process. Beware of DIY kits that force you to do all of the work yourself. Asset protection plans should be unique to you and your business and a good company can make sure you are covered in areas that you might never think of on your own.

You Might Not Be As Covered As You Think

LLC’s are fairly new, having only existed in the United States since 1977 when Wyoming first recognized them as a corporate entity. Within the last 30+ years, the tax benefits and relative insulation from personal risk has made LLC’s the preferred business structure throughout the country, but this format is not bulletproof. Proper structure and an asset protection plan is the best way for you to protect and maximize everything you have built.

Author's Bio: 

Jackson Cooper is a investment & finance enthusiast, involved with the experts at American Society For Asset Protection. Look to American Society For Asset Protection, true leaders in the professional Asset Protection industry, to properly guard your assets from lawsuit & litigation. Connect with them on LinkedIn, Facebook. Learn More On YouTube