Surprisingly good advice from a somewhat unusual source (this guy is a self-proclaimed ‘internet marketing guru’ rather than an attorney, it seems) …
… he says 7 steps, but it’s actually three steps:
1. Separate your personal assets from your business assets – in fact, most of our personal assets are in my wife’s name, not mine.
2. Put your business assets in an LLC – actually, I use a combination of trusts and LLC’s, but this is where a good attorney and accountant comes in handy!
3. Separate your investments into separate LLC’s – I agree with this completely; I have more companies that I know what to do with, each houses just one business or investment (say, one property).
He also glosses over a ciritcal step, if you can swing it (I never did this … but, in hindsight, it’s a wonderful thing to do): separate your business into TWO companies – one holds the client contracts (hence, the revenues), and the other provides management services (hence the costs).
But, here’s the beautiful thing: the management company charges just enough (check with an attorney on how to do this right!) to keep the ‘fronting company’ (i.e. the one with the client contract) at roughly break-even … it’s the one that’s most likely to get sued by customers (those are the expensive law suits!) whereas the management company is the one most likely to get sued by employees.
For information on company protection and charging orders, check out these two links:
The bottom line: DON’T hold businesses or other active investments (e.g. real-estate) in (a) your own name, or (b) as ‘doing business as’ or (c) in the type of entity where the ‘general partners’ are held personally liable for the performance of the ‘business’.