How to Protect Your Personal and Family Asset as an Entrepreneur

If your company raises debts or is close to closing, how can you protect your personal and family assets, according to the law?

The current economic downturn opens the way for facing the important and delicate issue of protecting the entrepreneur’s personal assets.

Does the Limited Company Partner Have No Limited Liability?

The limited partnership is usually the corporate type adopted by entrepreneurs. From this register, a legal entity is born, with its own equity, separated from the personal patrimony of the partners.

Once established, the company takes on a life of its own, establishing relationships with employees, suppliers, customers, the tax authorities, banks, and others. With its development, the company no longer only interests the members that made it or even possible future partners, and it is also in the interest of all those involved with it.

The legal basis is that of distributive justice, in which the balance is sought to attribute to each one the burden corresponding to the benefit that he had or was seeking to have, observing the nature of the different relations which is done through a highly skilled Utah criminal defense attorney.

First of All, What Entrepreneurs Should Do About Their Business

It is important for the entrepreneur to devote adequate investment to his company, recording its value like social capital in the company’s constitutive acts. The financing of the company through debt or more informal means leads to its undercapitalization, which can be alleged as a ground of disregard of the legal personality for the purposes of its accountability with its personal assets.

More important than that is still not to confuse the company equity with your own. The confusion of these two estates is common ground for the disregard of the legal personality. If the entrepreneur himself does not respect the separation between the assets of his company and his personal assets, it can not be expected that the judges and courts will do so.

Legal Measures for the Protection of Personal Assets

  • Family Welfare

Most people have heard that their residence is considered family property. This legal institute makes residential property impenetrable by creditors.

  • Donations with Clauses of Incommunicability, Unreliability, and Inalienability

A broader measure is the donation of goods recorded with the restrictive clauses, that is, incommunicability, impenetrability, and inalienability. The entrepreneur who knows that he has a high risk of losing his personal assets to the creditors of his company can donate it to third parties, especially his heirs, anticipating his succession. Even with the precautions mentioned above, the entrepreneur usually knows if he or she is in real danger of losing his or her personal assets to the debts of his company. In this situation, the donation with the restrictive clauses may be the appropriate measure remembering that in case of a break, the investment made by the entrepreneur will be lost.

  • Donations to Fiduciary Entities Abroad

Alternatively to the donation of assets to heirs, the entrepreneur may make use of legal fiduciary entities abroad. Generally intended to manage financial resources in favor of their beneficiaries, fiduciary entities are often an appropriate alternative when giving to natural persons is not desirable for any reason or financial resources that must be maintained under the professional management of a bank or independent investment manager.

  • Other Immovable Property

The entrepreneur can also make use of private pension plans. The funds kept in these plans may not bring high financial returns and has been confirmed by the Superior Court of Justice (STJ), besides not having to be shared by means of inventory in case of death of its holder. It is common for them to serve as a reserve of the entrepreneur for the situation of breakdown, also serving for their dependents to meet expenses after his death.

  • Patrimonial Planning

As can be seen, measures to protect personal assets are legal and legitimate when carried out in asset planning, considering the exposure of the entrepreneur to risk. Donations of assets to heirs or fiduciary entities already facing debt or lawsuit are no longer planning, but fraud or other act rebuked by law. With creditors defending their credit bureau with diligence, the assets can hardly be preserved.