The most recent liability protection strategy of a business is to split the business assets by locating the business in one entity and the supplies as well as the building in separate entity.
Well then, I will show you that by employing a case in point. I got a client who is running a business of insect and pest control. They got this hereditary business for many years. This business got two places in different counties. They made different corporations in each location. These buildings were located into different LLCs. The trucks and spray equipments were being put in place still another different LLC. It seems that it is too much. You just think of all the bookkeeping and accounts administration and the return of tax!
When the company had a problem in mixing the chemical, it has an impact to a little child that got sick. The little girl is getting well very soon, but the parents cannot accept the treatment and take the case to the court. The company got a good reputation for years and disappointed with the mistake, so they are willing to solve the case with the customer in a good manner.
Anyway, the parents still chase for the big money for compensation. At the end, as the company had a strategy to place the assets in different location, the sue of the parents can only go to only one corporation. The parents finally got the compensation for the girl’s illness, but they cannot take everything. On the contrary, the company was able to do the recovery with doing the act of preventing at the same time. The conclusion that we got is that separating the company assets has an advantage of doing the right thing without getting loss.
Beside the liability protection, separating the business and assets has another advantage of tax report. For instance, if your buildings and business are in different LLCs, you are able to utilize the business income for paying the building rent at the LLC. Therefore you can spend less on Social Security and Medicare since rental income has different tax with the business income.