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Kendall County Small Business Asset Protection Lawyer

Oswego small business owner asset protection attorney

Common Mistakes to Avoid in Small Business Asset Protection

Nearly everyone has an estate. Your estate includes everything you own, including your business, investments you own, your home or other real estate property, your car, furniture and other personal belongings, life insurance, bank accounts, and much more. While you cannot take your estate with you after your life ends, you can make plans to protect your estate and decide how your assets will be shared among your loved ones or other parties.

In Kendall County, estate planning is crucial for many families, and it can be especially important for small business owners. A comprehensive estate plan that includes asset protection strategies can help families protect against financial difficulties related to a persons' disability or death. With an asset protection and wealth preservation strategy in place, family businesses and personal assets may be safeguarded against potential risks.

Why Business Owners in Oswego Need Asset Protection and Estate Planning

Asset protection is crucial for small and medium-sized business owners because of the inherent risks and pitfalls that characterize everyday business operations. For instance, almost all businesses face the risk of lawsuits and claims with regard to:

  • Mortgage and debt obligations to vendors and third parties
  • Claims for injuries or damages caused by a business or its employees
  • Product liability
  • Professional negligence and malpractice concerns
  • Consumer protection issues

If not properly handled, such risks could lead to significant losses of both personal and business assets. Consulting with an Oswego business asset protection and estate planning attorney can help business owners define these risks and create robust plans to help avoid or minimize potential losses, ensuring that they can continue to operate their businesses successfully.

Types of Claims on Assets

There are two main types of claims that can be made on assets:

  • Internal asset claims - Internal claims are made by creditors whose right to recourse is restricted to the assets owned by a company. For instance, if a company owns the property where the business is located, and a person who was visiting the business was injured after slipping on a wet floor, the injured party will usually only be able to bring a claim against the company's assets, including the real estate property. As long as the business owner was not directly responsible for the injury, their own personal assets would not be affected by this type of claim.
  • External asset claims - Unlike internal claims, external claims can extend beyond the business's assets to cover the business owner's personal assets. For example, if a business owner was operating a truck owned by the company and carelessly drove into a group of pedestrians, the injured parties can sue both the business and the owner.

Being aware of the different types of claims that may be filed against a person or business will make it easier to prepare ahead of time and safeguard assets from seizure. Our Yorkville business asset protection and estate planning attorneys can help business owners understand what assets may be vulnerable to claims and what steps can be taken to protect different types of assets.

Types of Asset Protection Planning Strategies

Asset protection plans can vary depending on the needs of a person and the business they own. There is no one-size-fits-all approach. The strategies that may be used may be based on the types of assets possessed by a person or business and the creditors who are most likely to bring claims against these assets. Some of the typical legal strategies employed for business asset protection include:

Establishing a Company

Incorporation is the most widely used method of shielding business assets from liabilities and losses. Once a business attains the status of a Limited Liability Company (LLC), business assets will become separate from the owner's personal assets, and third parties can no longer bring claims against a business owner's personal property, except in rare circumstances. Benefits of forming a company include:

  • Limited liability, which will enable an owner to conduct business without worrying about damages and losses.
  • Taxation benefits, such as pass-through tax deductions.
  • Flexible and customizable management.
  • Professional credibility for a business.
  • LLCs are inexpensive to form and renew.
  • Membership options are flexible.

Other company types that offer valuable business asset protection include:


An S-Corporation is an enterprise structure that offers many levels of business asset protection. It operates under stated rules and certain bylaws outlined under Chapter One of the IRS Code. Some of the benefits that come with using an S-Corp include:

  • It simplifies the process of dispersing salaries and other types of compensation.
  • Shareholders can receive dividends.
  • A company enjoys pass-through taxation benefits and other advantages.
  • It is easier to transfer business ownership.

Limited Liability Partnerships (LLPs)

LLPs are a common way for two, three, or more business partners who have invested in the same company to protect their own individual interests. The following are some of the benefits of an LLP:

  • Freedom to choose a name for a business and function as a business entity.
  • Liability protection from potential lawsuits and other possible issues.
  • Members can be added and removed from the partnership easily.
  • Partners receive and enjoy the advantages of corporate ownership.

Family Limited Partnerships (FLPs)

FLPs are a great option for business owners seeking to join forces with their family members to protect their assets together as a group. It is often the perfect legal way for a family to pass on wealth to another generation. Some of the benefits that this option provides include:

  • Ability to conduct business operations as one family, ensuring that family members can care for one another.
  • Families can minimize the accounting and legal costs involved with combining business interests.
  • FLPs provide favorable taxation benefits.
  • Family members involved in an FLP are not liable for damages and debts.
  • Participation in the decision-making and management processes is easier.

Estate Planning for Business Owners in Kendall County

A risk assessment is often the first step that business owners take when creating an estate plan. This assessment will involve a comprehensive review of the assets a person owns, as well as the potential concerns that might result in financial losses or affect their plans for retirement. Our Yorkville estate planning attorneys can perform a complete risk assessment to find potential concerns, such as creditor claims or economic decline. We then work with our clients to determine the best options for estate planning, and we assist in the creation and execution of legal documents.

We assist clients in determining the best ways to protect and manage assets while addressing the issues uncovered in risk assessments. These estate planning and asset management strategies may involve using trusts or LLCs to protect assets against potential litigation. We work with business owners and families to identify their goals and objectives and preemptively address possible conflicts, such as issues related to blended families or stepchildren.

We also work to gather information about personal and business assets, including business interests, personal property, investments such as stocks and bonds, and various types of bank accounts. This will allow us to identifying any vulnerabilities that may affect clients in the short-term or long-term future. We can provide advice regarding insurance gaps, tax planning, and reviewing employee contracts, non-disclosure or non-compete agreements, etc. to ensure that a business is protected against unfair competition. We make sure that all of a business owner's needs are handled with the best possible care so that their family's future will be secure.

Tools Used in Estate Planning for Small Business Owners

There are some legal documents that can be very beneficial in estate plans for business owners. These documents include:

Living Trusts

A living trust is a legal agreement that details out a person's goals and plans for how their assets should be managed and distributed to beneficiaries. A business owner may establish a living trust in which they will name a trustee or co-trustee to monitor and administer the assets in the trust. A living trust can serve as a plan that specifies who will inherit a person's assets, including their personal property or their business. It can also provide for the distribution of assets prior to a person's death and ensure that certain assets will be used for specific purposes.

Power of Attorney

In many cases, a business owner and their family can benefit by creating a power of attorney for property, which is also known as a "financial power of attorney." A power of attorney is a legal agreement that will allow the "principal" to name someone, who is known as their "agent" or "attorney-in-fact," to make decisions for them about certain issues if they become disabled or are no longer able to manage their daily affairs on their own. The agent will have the authority to deposit money into bank accounts, withdraw funds from accounts when necessary, manage a business, apply for and manage benefits, and even buy or sell real estate.

A financial power of attorney can be a crucial part of an estate plan, because it allows a person to prepare for the possibility of incapacitation, illness, or disability by give decision-making authority to a person they trust to manage their finances and handle their affairs. This can provide flexibility while preventing future conflicts between family members by designating a person who will have the authority to address these issues.

Without a financial power of attorney in place, guardianship may need to be established before someone else can manage a person's affairs. Legal guardianship places limitations on a person's liberty, and a guardian may need to seek court approval before making certain types of financial decisions. A financial power of attorney can be a much better option in emergency situations, and it can allow for more flexible solutions while saving thousands of dollars in legal expenses.

Life Insurance and Tax Strategies for Business Owners

For small business owners, life insurance can be an essential resource. These policies can replace the income a person would have used to provide for their family's needs, ensuring that family members will not suffer hardship in the event of a person's death.

Families may also need to take proactive steps to address potential estate taxes that may apply after a person's death. Estate tax planning may involve structuring the assets a person owns to ensure that the estate taxes that will apply after their death will be minimized. In Illinois, estates valued at $4 million or more are subject to estate taxs. A graduated tax rate is used in these situations, with a maximum rate of 16 percent.

Life insurance is a valuable asset that may result in estate taxes being owed in Illinois. However, an irrevocable life insurance trust (ILIT) can help address these concerns and minimize potential taxes. An ILIT is a trust that is used to hold and manage a life insurance policy and ensure that the benefits of a policy are paid out to beneficiaries correctly. Because this type of trust is irrevocable, once it has been created, the creator or grantor cannot make changes to the terms of the trust or remove assets from the trust.

Advantages of Using ILITs

Exemptions and exclusions may be used to lower the taxable value of a business owner's estate. Estate taxes do not apply to assets that are transferred to a person's spouse after their death or to a charitable organization. In addition, trusts allow assets to be transferred to beneficiaries tax-free.

ILITs and other types of trusts can help prevent complications related to the probate process. After a person's death, certain assets must go through probate before they can be distributed to the beneficiaries named in the decedent's will. However, when an ILIT is used, the benefits from the life insurance policy will be paid directly to the trust. The trustee will then distribute these benefits according to the instructions provided by the grantor. These transfers are made outside of the probate process, allowing them to be completed much more quickly and easily.

As was previously mentioned, if an estate exceeds the applicable estate tax allowance, beneficiaries may owe estate taxes on the amount above this threshold. An ILIT can specify that the benefits of a policy can be used to pay certain estate taxes, or it may even prevent estate taxes from being owed at all by ensuring that the life insurance policy is not included in the estate. An ILIT can also ensure that the assets in the trust will be managed by financial experts. This can safeguard the beneficiaries from losses that may occur due to immaturity or inexperience.

Contact an Oswego Small Business Estate Planning Lawyer

Whether your situation requires one or multiple asset protection strategies, you need an experienced Oswego estate planning attorney who will help you determine the necessary legal instruments and processes needed to accomplish your goals. At Gateville Law Firm, our attorneys can develop a reliable asset protection plan for you. Our team consists of renowned real estate attorneys with qualifications and backgrounds in family law, business law, estate planning, tax management, and asset protection. We will not just walk you through the process of creating a plan, we make sure that all your instructions are followed to the letter so you and your family can have the peace of mind you deserve.

Contact us today at 630-780-1034 to arrange an initial consultation with our firm. We look forward to helping you create and execute plans that will allow for the ongoing success of your business while meeting your family's future needs. We are proud to offer services to clients in Oswego, Yorkville, Plano, Plainfield, Kendall County, and other nearby communities.

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