Making your company litigation-proof is like trying to make a house tornado-proof. There's a lot you can do, but there's always going to be some vulnerability there.
Business owners and investors might as well think of lawsuits as a force of nature. You can't predict them, and you can barely protect yourself from one. This is even more true once the lawsuit has been filed. These life-ruining events pick up momentum from the beginning, just like a tornado.
The reality is you will be sued as long as the conditions are right. The only thing preventing a lawsuit is the correct set of circumstances.
Don’t assume probability will save you. One in four Americans are sued in their lifetimes. Business owners and investors are even more likely than a regular Joe to be sued. It could easily happen to you!
Remember, lawsuits are like nature: they're inevitable. It's a question of when, not if, they will happen or not.
There are three conditions that make a lawsuit extremely likely. If all three are active at the same time, then a lawsuit is almost guaranteed to happen.
While there is no way to make your company immune to a lawsuit, you can definitely lower the probability of one taking place. A good asset protection plan addresses each of the conditions/steps I mentioned above. The goal is to stop, prevent, or make it extremely difficult for a plaintiff's legal team to go through each step.
So how do you make it difficult for them to go through each step? The solution is simple.
Spread out your company assets with a series LLC.
Limited Liability Companies (LLCs) prevent someone from suing you personally. You can learn how to start an LLC here. However, storing all your assets in one place is still a risky strategy. What you want to do is spread your holdings across multiple business entities. This will reduce your exposure and make it difficult for someone to determine your net worth.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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