New Jersey is another state from which many people call with questions about asset protection. Rightly so, because New Jersey does not offer any homestead exemption, which means that anyone with unprotected assets is completely at risk of losing EVERYTHING, including the home in which they live. Not a good scenario.
New Jersey Asset Protection
The saving grace for residents of New Jersey is the protection offered to various business entities. Before you continue reading this article, please make sure you have a full understanding of the difference between inside and outside liability. In short, inside liabilities are those incurred by the business entity itself. For example, if a person operates a limited liability company (an “LLC”) and the LLC itself leases office space, then the lease is an inside liability. Only the LLC is responsible for making the monthly payments or in the event of default.
Outside liabilities, on the other hand, are those incurred by members of an LLC or partners in a limited partnership. For example, if John Doe is a member in an LLC and is at fault in a traffic accident that occurs while he is going to the beach with his family one weekend, then only John is responsible for the damages caused by the accident, not the LLC in which he is a member.
Charging Order Protection In New Jersey
The great thing about New Jersey is that it provides charging order protection for both LLCs and limited partnerships. A charging order is a tool that judges use to help creditors collect money after a creditor is successful in court. Basically, a charging order allows a creditor to collect income allocated to a member of an LLC or a partner in a limited partnership (“LP”). That may sound bad, but it is better than the alternative. Some states allow creditors to force a dissolution of an LLC or LP. Others allows for a foreclose of LLC or LP interests.
While New Jersey asset protection laws do not provide the most protection in terms of exempting assets from the claims of creditors, it is a good state in which to organize certain forms of business entities. Contact an asset protection attorney today to learn how you can can take full advantage of asset protection laws and form a comprehensive asset protection plan.
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