How to Protect Assets

Eliot Wagonheim: You don't have to have an Inc. after your name, you don't have to have an LLC, or a limited partnership after your name. Just could be your own name, you could go out there, and you could sell whatever you want to sell, or render whatever services. Millions of people do it, there's no log instead. Edward Hiller: You are yourself a proprietor, you are the yourself a proprietorship, there's really no distinction between yourself and your business. If something goes wrong, the person who is running the business is personally liable. John Smith's house is on the line, his car, his Honus Wagner baseball card, everything that he owns is on the line. So if he defaults on a contract, you injure somebody, and don't have proper protection. Your personal assets are all at risk. Fred Provorny: One way to avoid that is using either a limited liability company, or corporation. Edward Hiller: A corporation, and LLC are treated as a separate person if you will. Eliot Wagonheim: Let's form something that actually is the business, and so if something goes wrong, that entity, that LLC, or that corporation is what's on the line. Edward Hiller: Creditors then can't go after your personal assets. Eliot Wagonheim: It's the corporation that will be sued, or the LLC that will be named in the lawsuit. So John Smith and his Honus Wagner baseball card, and his car, and his house are not at risk. Edward Jacobson: I have seen a problem when people create an entity like an LLC, and it set up a name, but all the expenses are running through a personal checkbook. Eliot Wagonheim: People will often take business payments, and deposit them directly into their personal accounts. Edward Jacobson: Somebody coming and could challenge, that now this LLC is a shame. It is a shell. Edward Hiller: It's just a corporation to name only, you really are still operating it as an individual, therefore we're going to come after your individual assets. Eliot Wagonheim: That is a potential problem.