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Understanding LLCs and Asset Protection Just about ten years ago, our economy went through one of the toughest periods since the depression of the early 20th century. From that experience, there were many businesses and individuals who suffered serious financial losses, even to the point where some have not been able to fully recover yet. There were a lot of businesses that could not endure and ended up having to close down for good, while countless individuals and families ended up losing their homes along with other vital assets. Since then, the economy has certainly improved a great deal, and the majority of us who survived that time have been able to learn some valuable lessons about how to stay protected from any future financial harm. Coming out of that rough period, many people have learned the great importance of having measures in place to protect their assets from being taken away. Until then, there was a surprising number of people who were not even clear on the distinction between what assets are and what liabilities are. Even when someone did grasp the concept of homes and properties being assets, they still might not know that other things like cars are considered liabilities because their values are generally lost over time. With a clearer understanding of what assets truly are, people have then been able to gain even greater understanding of what they can do to both protect the assets they have and increase the numbers of assets they have. Of the various strategies that we can use to protect our assets, the process of forming a limited liability company, or LLC, as been one that has recently become very popular. With our technologies continuously advancing, along with the immense expansion of global online markets, many people have been inspired to form their own businesses. Especially since a great majority of these are small businesses, if not essentially sole proprietorships, they have learned that forming their businesses as LLCs is one of the best ways to protect their personal assets if anything ever goes wrong. If they were to form their businesses without the protection of an LLC, they are then at risk of losing their personal assets along with their business assets if someone were to file and win a lawsuit against them.
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Forming your business as an LLC affords you many of the same benefits and protections that corporations get, but with much less paperwork bureaucracy and with fewer personal risks. Again, the key factor here is that a standard corporation can be handed a judgment in a lawsuit which could then place your personal assets at risk of being taken away. With an LLC, however, you will have greater assurance that your personal assets will not be combined with your business assets. Because of this, your personal assets should remain protected, even if your business assets happen to be taken away.
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In many ways, this is actually a great time for anyone with enough discipline and will to take that leap and form a business. Learning from the past, by taking steps like forming the business as an LLC, people are less likely to repeat the financial mistakes that led to our previous economic struggles.