Protecting Assets from Lawsuits: Legal Strategies for Business Owners in NY

As a business owner, it’s possible you’ll one day face claims that could reach beyond your company and threaten your personal assets. You can protect what you have from lawsuits brought against a company you own or hold a membership interest in, and the right strategies for you will depend on the unique situation of your business. A Queens business attorney is the best one to show you how to protect your assets from lawsuits.

How to Protect Assets from Lawsuits

Form an LLC

Under New York law, a member is not liable for the debts or obligations of the LLC solely because of their membership. For this to work, you’ll need to file Articles of Organization with the Department of State, adopt a written operating agreement, and keep the company’s finances completely separate from your own. Always maintain separate bank accounts, distinct contracts, and clean records to reduce any chance that a court will pierce the entity and reach your personal holdings. 

Get Good Insurance

Even with an LLC, you’ll want and need liability insurance. A solid commercial general liability policy and any needed professional coverage will be able to absorb many claims before they even threaten the business, let alone your personal property. Review the limits each year and confirm that it meets your needs. 

Know and Transfer Your Assets

Make sure you know exactly what you own and what’s potentially vulnerable. Then you’ll know best how to protect everything. Certain personal assets are already protected no matter what kind of business you have, including equity in your primary residence up to a certain amount, life insurance proceeds and annuity contracts (when the policy is properly structured), and retirement accounts under ERISA or qualifying individual retirement arrangements. 

You can also transfer assets into an irrevocable trust for the benefit of your family. Once the transfer is complete and you have no beneficial interest in those assets any longer, they generally sit beyond the reach of your future creditors. New York does not recognize self-settled trusts that name you, the creator, as a beneficiary, so the trust must name someone else as beneficiary. Be aware that you need to move assets into the trust before a claim is made against your company. If you try to make a transfer once a claim’s been made, it can be nullified as fraudulent. 

Make Sure Your Documents Are In Place

Business succession tools like buy-sell agreements and carefully drafted operating agreements will keep any ownership transitions orderly and reduce the chance that a dispute or unexpected death could force a fire sale of company assets. Be sure that you’re reviewing your overall risk profile at least once a year with your attorney. New contracts, a change or addition of location, or a change in the type of work you perform can all create fresh exposure and require that you adjust your entity’s structure, insurance limits, or ownership titles before any problem appears. 

Talk to a Queens Business Attorney

Contact DeCandido & Azachi today to set up a free consultation on your situation. We serve the entire Queens area from our Forest Hills, NY office. 

Tags: business sucession, estate plan, estate planning, probate
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