Asset Protection and Business Planning

Will putting my business or other assets into a limited liability company (LLC) give me the same protection from personal liability as a corporation?

Generally speaking, yes.  One of the essential differences in making a choice to set your business up as an LLC instead of a corporation is that under some circumstances, you may have better asset protection opportunities with a limited liability company.

Can I better protect against creditors by having my assets in a limited liability company instead of a corporate entity?

In some instances, yes.  If your debt is unrelated to your assets (e.g., auto accident liability or malpractice liability) and if your assets are in a corporation, creditors can enforce a court judgment by taking away your stock in the corporation.  With an LLC, however, your creditors may only be able to obtain what is known as a “charging order.”  A charging order will not allow your creditor to take your limited liability company interest away from you like taking stock in a corporation.  Instead, it merely gives the creditor the right to be paid any distributions that would otherwise be made to you from the LLC.  If no distributions are made, the creditor gets nothing.  As a result, with an LLC, your creditors are more likely to consider settling their claims on terms more favorable to you.

Are there advantages to setting up asset protection entities in other states, and can I use my New York lawyers to accomplish that?

Yes.  Different states have different LLC statutes and therefore have different levels of protection.  Among the “good” states for asset protection are Alaska, Delaware and Nevada, for example.  Your New York lawyer can assist you in creating LLC’s in those and other states.