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Nevada Asset Protection  
Nevada Asset Protection Tutorial  
What is a "Safe Asset" vs. a "High Risk Asset"?  

In making the decision to protect assets, it is important to understand the distinction between Safe Assets and High Risk Assets. Safe Assets are those which do not, by themselves, produce a high degree of lawsuit risk. For instance, the ownership of investment securities such as stocks, bonds, or mutual funds, is unlikely to cause you to be sued.

High Risk Assets, on the other hand, are those which, by their nature, create a substantial risk of liability. These are generally active business type assets, such as Joint ventures and partnership interests, rental real estate, or vehicle ownership, any of which may cause you to be sued.

Use Multiple Entities

Once the distinction between asset types has been made it is important to use multiple investment holding companies to keep "safe assets" separate from "high risk" assets. A High Risk Asset such as real estate, which creates significant potential liability should not be placed in the same LLC with Safe financial assets.

Those who have more than one type of business should use different entities to conduct each facet of the business. The goal is to insulate each separate business from liabilities produced by the other activities.

High risk assets must be isolated from safe Assets. Additionally high risk assets must be isolated from other high risk assets, in order to avoid contamination.

Protecting "Safe" Assets

Safe Assets with a low probability of creating lawsuit liability can be maintained in a single Nevada Investment Holding LLC. In the usual case, Husband and Wife are members owning a 50% interest each. If unmarried a 100% interest can be held. Financial assets such as brokerage accounts, mutual funds, savings accounts and insurance policies are transferred to the LLC.

The process is simple: Once we have formed and organized the LLC for you, it is just a simple matter of transferring the safe assets to it. Once transferred, a asset search against your name will not reveal your ownership of those assets. In the event of a future lawsuit against the member (husband or wife), the assets of the LLC may not be seized by the creditor, instead the creditor is limited to the charging order remedy which does not affect the property in the LLC.

Although the family home is a reasonably Safe Asset, with liability generally covered by insurance, because of tax issues it is extremely important how the family home is handled. Please read the section below on Protecting a Personal Residence.

Protecting "High Risk" Assets

An example of a High Risk Asset is an apartment building. The liability potential of rental apartments is particularly high. Although liability insurance coverage is usually available, the amount of coverage may not be sufficient. A fire in a densely populated building may cause severe injury or death to many tenants. The potential liability for such a tragedy could easily reach into the millions of dollars, exceeding by far the amount of insurance coverage. Apartment owners can also be held responsible for the acts of the resident managers. If the resident manager engages in race or sex discrimination in renting to tenants, or is guilty of sexual harassment, this liability may be imputed to the owner of the property. Acts such as these may not be covered under standard insurance coverage.

If this asset is transferred to the same Nevada Investment Holding LLC that holds all of your other assets, that LLC, as the owner of the property, will face a high degree of lawsuit exposure and all of your assets will again be at risk.

Instead, the best approach for a High Risk Asset such as an apartment building is to transfer that property to its own separate LLC.

Generally the Nevada Investment Holding LLC is the proper way to hold High Risk Assets. Since no individual member of a Nevada LLC can be sued for an LLC related obligation, the liability associated with the High Risk Asset can be contained and insulated in the Nevada LLC. If a number of High Risk Assets are owned, each should be placed in a separate Nevada Investment Holding LLC.

Some types of commercial real estate may also constitute High Risk Assets. Office buildings, hotels, restaurants, nightclubs, or any other building where many people work or gather, all have the potential to produce stratospheric liability in the event of some type of disaster.

A Business that holds title to a building out of which it operates is taking unnecessary risks. A liability produced by either the building or the business would jeopardize the other. For example, a problem arising from the building would produce a claim against the equipment, accounts receivable, and cash in the business. Likewise a liability arising from the business would jeopardize the equity in the building. The building should absolutely be separated from the business by holding it in a separate Nevada Investment Holding LLC. High Risk Assets must be kept separate from each other asset.

To obtain "bullet proof" asset protection for holding assets such as: High risk Intellectual Property, High risk Domain Names and Web Sites or Liquid Assets to be held outside of the jurisdiction of a U.S. Court, the use of a Offshore Incorporation Services should be considered.


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