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Fundamentals of Asset Protection
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Posted On :
Nov-22-2010
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Article Word Count :
499
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Multinational Corporations are generally medium sized business or larger running operations in multiple nations.
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Multinational Corporations are generally medium sized business or larger running operations in multiple nations. The minimal requisite for multinational corporations is to operate in at least three dissimilar countries. This may be carried out through founding subsidiary companies or corporations in other nations where the majority ownership, or entire ownership, is that of the parent company.
A critical aspect to understanding asset protection is how the “cause of action” distinguishes an "outside lawsuit” from an "inside lawsuit”.
If the owner of a (personal) vehicle were involved in an automobile accident where after a lawsuit ensued, the "cause of action" for that lawsuit would be the automobile accident. Because the automobile accident would have had no direct relationship with the business of the Limited Liability Company, the LLC would not be listed in the lawsuit. If the Plaintiff's attorney chose to pursue the assets of the LLC it would be considered an “outside lawsuit”.
If the owners of an apartment building, a rental home and a beach house were all titled into one Limited Liability Company and the rental home caught fire and burned down half the city block, the owner would invariably be sued. The "cause of action" for that lawsuit would be the rental home fire. Because the rental home fire would have been directly involved with the business of the Limited Liability Company, the LLC would be listed in the lawsuit. If the Plaintiff's attorney chose to pursue the assets of the LLC, it would be considered an "inside lawsuit”.
Many investors believe that the charging order is somehow a universal protectorate, when, in fact, it is not. The charging order does not apply to an inside lawsuit!
Bad News: Once a lawsuit ensues and the cause of action has been determined to be related directly to the business operations of the LLC, there is nothing to protect any of the other assets owned by the LLC from being seized by a judgment creditor.
Good News: Members are not liable for the debts and obligations of the LLC. There is no personal liability for any members beyond the scope of their investment into the LLC. Member losses are contained to their respective equity in a Limited Liability Company.
The loss of a rental home due to fire was unfortunate and hopefully the insurance policy would compensate the owners. However the loss of equity in the apartment building and beach house was unnecessary and avoidable. When a person has valuable assets, they should be placed into separate entities based on the risk and value of the asset. Had each property been titled in separate entities their loss would have been isolated.
Should a person's assets contain enough equity, the costs to form and maintain bank accounts, bookkeeping and filing annual tax returns for multiple entities is an easy, logical and tax-deductible decision.
For more information on the asset protection a charging order provides, be sure to contact the author.
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Article Source :
http://www.articleseen.com/Article_Fundamentals of Asset Protection_42572.aspx
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Author Resource :
Jay Butler is an asset protection specialist for an International Business Company in the Republic of Seychelles. Visit their website for more details and free consultations on their services regarding asset protection and the formation of multinational corporations.
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Keywords :
asset protection, multinational corporations,
Category :
Business
:
Business
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