Discover how to protect your business assets in a lawsuit by watching this video. When you start a real estate investing business, you risk being sued. This video is going to show you how to keep your property investment business from being sued and provide some tips you can do BEFORE it happens.
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How To Protect Your Assets In A Lawsuit
The best way property investors can protect their assets from being seized in a lawsuit. Step number one. Don’t get sued. That’s sort of the bottom line. Don’t get sued.
Joe: And there are some real ways that you can avoid this. But sometimes it’s going to happen, and sometimes you’re going to have to deal with it. And if you’re in business long enough, you’re going to get sued eventually. But, you can do everything that you can to keep from being sued and I find the best way to avoid being sued is to act honorably in a transaction. Be ethical in your dealings with people. Put yourself in control of the deal using the Zero Down Structure hierarchy that I teach. Use the right structure for the right deal. Don’t cheat people. Don’t rip people off. And if you screw something up, apologize. And if you didn’t screw something up, but somebody’s angry with you, apologize for that, too. Remember that every time you get angry, you might as well just reach back into your pocket and pulling out cash because it’s going to cost you money.
Joe: So, the best way to avoid a lawsuit is to stay on good terms with the people that you work with. Unfortunately, that’s not always possible, and sometimes you’re going to run into a problem and you’re going to have to deal with that problem. If that happens, make sure you get proper representation. Make sure you get an attorney who is going to look out for your interests and watches out for you and walks you through the process. It’s going to be expensive, it’s going to be painful, but it’s probably something that you’re going to need to do.
Joe: One thing to keep in mind is if you don’t have any assets to protect, it’s not really a big deal. You can’t get blood from a rock. But if you start having assets to protect then you need to start thinking about ways to protect those assets. One of the things that you can do is to set up retirement accounts. Retirement accounts are harder to access in a lawsuit than any other type of investment that you have. So set up a Roth IRA. I’ve done other videos about this and it really helps to have an IRA.
Joe: Let’s take O. J. Simpson as an example. O. J. Simpson is probably guilty of killing his wife. But he got acquitted in a court of law. Then, he got sued in civil court and he lost that case. So, he had a lot of money that could have been take by his victim’s family, but they couldn’t attach his retirement account where he had most of his money. So he was protected because he had a retirement account and even though he had a huge judgment against him, he was still protected.
Joe: Now, I don’t recommend that you go out and kill your wife, but you can put your money into a retirement account and it’ll give you some protection.
Joe: You can also set up multiple limited liability corporations. Never put more money into a corporation than you can lose. So, you want to split up your assets depending on how much you’ve got. You want to split up your assets so that some money is always protected. It makes it harder for them to get to you if they have to go through an LLC first. And if you’ve got your assets, let’s say you have three houses in one LLC. And one house, you get sued because somebody hurt themselves at one of your houses and your insurance didn’t cover it and they decide they’re going to come after you.
Joe: They might be able to win. And if they win, you might lose that house. And you might lose the other two houses that are in that LLC. But if you have nine houses and you’ve got three houses here and three houses here and three houses here, they’re not going to be able to attach these other properties in most situations, if they have to go after that particular LLC that owns that property. So, it’s good to break up your assets into multiple LLCs so that it’s harder to go after you and be able to get the judgments against you.
Joe: Another thing you might try is, in your personal residence you might have a home equity line against that property. So, let’s say you’ve been able to pay off that property. It still makes sense for you to have a home equity line against that property so in case there is a lawsuit or there’s a problem, you could go out there and you could pull some of that cash out of that property and at least you’d have a reserve to work with to pay your attorneys, to live on, and you know, instead of having to go through a refinance. Because if you have to go through a refinance at that time to try to get that money, it’s going to be harder for you to do that because you’re going to have a judgment, or you’re going to have a pending lawsuit on your record and it’s going to be less likely that you’re going to be able to get financing in that situation.
Joe: So, go out and you have a HELOC that’s in place before anything happens. That way you’ll be prepared to be able to protect yourself when that time comes.
Joe: One of the things I learned when everything went under for me back in 1991 is that I tried to pay all the bills and I tried to be responsible for all the business bills that I had during that time. And I didn’t save enough money out for my family and for my own protection. So, what I suggest is protect yourself and your family first whenever you get into difficult times and then look out for the people that you have other obligations to. I know this sounds a little bad, but I think that it’s really important to make sure you protect yourself so that you can continue to move forward. And hopefully then you can come back and you can protect the people that you have other responsibilities to after you get back on your feet again. So, keep that in mind.
Joe: So, that’s the basics of asset protection. It’s not that hard to set up these types of structures. So, if you have, for example, a Roth IRA and it’s got an LLC that it owns, and then that LLC owns multiple LLCs. And then you’ve got another LLC that you own personally. And it can own multiple LLCs as well. And that makes it possible for you to be able to have money outside your Roth IRA. And then if you have a separate business where you’re just flipping properties and you’re not holding properties, maybe have a separate LLC for this.
Joe: Now, you don’t need all this stuff if you don’t have any assets to protect. Again, don’t worry about setting all this stuff up until you start building your portfolio. But once you start building your portfolio where you’ve got three, five, ten, twenty properties, that’s when you really need to start thinking about how am I going to protect these properties? How am I going to keep from losing these properties in a lawsuit if worst case scenario, a lawsuit arises? So, make sure you cover your butt and take care of those things.
Joe: All right. I hope that helps. If you like this video, subscribe, go to my website JoeCrumpBlog.com and sign up for my free newsletter and think about getting into my mentor program. I’ve got a six-month personal mentor program. I’ll work with you personally. You can go to ZeroDownInvesting.com and get all the details. It’s like going to college for a semester. And about that expensive.
Joe: All right. I hope that helps.