East Bay Business Daily

How should I protect my assets from collectors and potential lawsuits?

I have a business which has been established in my own name as a sole proprietorship. Now due to problems with the business itself, I am worried that important assets like transportation and housing might be collected from under my nose. What steps can I take to prevent this from happening? I have considered setting up a trust or a private holding company besides just incorporating. Legally, what are the best options?

Public Comments

1. As a sole proprietor, you are responsible for all your debts and those of your business. Creditors of the business can go after your personal assets if the business is unable to pay the debts. converting your business to a corporation offers protection, limiting your risk to the amount of your investment. However, doing that now will not protect you from obligations you incurred prior to incorporating. Professionals who operate businesses that do not provide protection against their private wealth, e.g. physicians, CPAs, and lawyers, often protect their assets by transferring them to other entities or people. A Physician may have a spouse owning the home, securities, etc. as an individual. They set up trusts for their children. To make sure such devices afford real protection, you should have them prepared by a good attorney. You cannot expect to get good reliable answers here. Experts need to have a lot more information about your business and personal affairs before they can advise you.
2. Talk to a lawyer. If the problems (debts) already exist in your business, it may be too late to try to shield your assets.