Setting up systems to handle known problems or issues that repetitively present themselves is generally a very good idea. It reduces the time required to asses the issue, develop a solution, and implement the plan. In essence, having systems reduces stress, because you know how certain issues will be tackled. Systems are good thing in life, generally, and in the world of asset protection.
The Purpose of Planning to Protect Assets in Advance
Whether you need a physician asset protection plan or a real estate development asset protection plan, the purpose of formulating and implementing a plan prior to claims arising (e.g. lawsuits being filed, bankers clamoring for more collateral, malpractice claims, etc.) is to avoid fraudulent conveyance issues, which cannot be addressed once a claim is pending without running the risk that a court decides to “undo” your allocation of assets.
Another Example of Why Planning is Needed in Advance: Protecting Business Income
We recently wrote an article about wage and income garnishment and specifically noted that wages cannot be garnished from the head of household under Florida asset protection laws. But what if the head of household is a business owner? In a relatively recent Florida bankruptcy court decision (the “McDermott Case“), it was determined that a business owner could not exempt his income from garnishment, even though he was the head of his household. Why, you ask? Because of a lack of planning and the failure to use systems.
See, the business owner in McDermott received irregular compensation from the business he owned. He didn’t receive a regular salary and he didn’t have an employment agreement in place with the business he owned. Those facts led the bankruptcy judge to conclude that the debtor’s income was comprised of business profits, which are not exempt from garnishment, as opposed to wages, which are exempt.
By crafting a pay plan with knowledge of the law and implementing a system to carry out the plan (e.g. recurring salary payments), the debtor in McDermott could have protected his income from garnishment and left some of the business profits within the business operating account, where it would likely have been protected as an outside liability to the business, assuming the business wasn’t a single-member LLC subject to Olmstead and the subsequent Olmstead statute.
Asset Protection Planning is Business Protection Planning
Your ability to earn income and make a living, your business, and the assets in which you have equity are all things that need to be protected. Hard analysis and advanced planning are the only ways to make sure that you and your business are fully protected. If you have questions about protecting your business, check out Lodmell & Lodmell’s Integrity Workplace Package, the Center for Employment Dispute Resolution, and contact an asset protection attorney today.
This Post Has 0 Comments