1. By Ward J. Wilsey, JD, LLM 3655 Nobel Dr. Suite 345 San Diego, CA 92122 (858) 764-2672 wardwilsey@wilseylaw.com The Wilsey Law Firm www.wilseylaw.com Asset Protection for Business Owners

2. Protecting Business Owners Insurance Business Agreements Entity Segregated Business Ownership Qualified Plan Captive Insurance Program Domestic and Offshore Asset Protection Trusts

3. Insurance Typical Client Any small business owner Reasons for Insurance Protection Bank Mandate Types Mandated Unemployment and Social Security Workman’s Compensation Optional Employee Customers Operation

4. Reasons for Insurance Payment of Claims Excess Liability may not be covered Lawsuit Plaintiff may be willing to settle at policy limits Legal Fees Insurance company does not want to lose! Requirement for Doing Business Bank loans Malpractice required for insurers

5. Employee Insurance Health Insurance Disability Insurance Employment Practices Liability Key Employee Disability Life

6. Customer Insurance Liability Premises Auto Employee Umbrella

7. Business Operational Insurance Business Interruption Insurance Business Property Insurance Key Employee Life Insurance

8. Business Agreements Shareholder and/or Partnership Agreement Buy Sell Agreement Funded with Life Insurance or Liquid Assets

9. ENTITIES

10. Types of Entities Corporations Limited Liability Company Limited Partnership Professional Corporation Limited Liability Partnership

11. Client Profile If client has no other assets Business makes over $100,000 per year Business has liability other than that imposed by owner If client has assets Entity should always be used

12. What Entities Protect Entities Protect Against Liability of Employees Liability of Other Owners Liability of Premises Contractual Liabilities What Entities Do Not Protect Against Liability of Self

13. C-Corporation PROS CONS Oldest Type of Entity Most case law Limits Liability Possible Tax Benefits Possible Self Employment Tax Savings $800 annual fee from California Possible Double Taxation, especially for successful companies Capital Gains for Real Estate Transfers

14. S-Corporation PROS CONS Same Limited Liability Benefits as C-Corp No Double Taxation $800 annual fee from California Capital Gains for Real Estate Transfers Lack of some Fringe Benefits like C Corp Limited to 75 Shareholders Shareholders must be Citizens or Resident Aliens

15. LLC PROS CONS Flexibility Lack of Formalities No Double Taxation No Real Estate Transfer Taxes Possible Charging Order Protection $800 Annual Fee Gross Receipts Tax

16. Limited Partnership PROS CONS Flexibility of LLC Lack of Gross Receipts Tax $800 Annual California Fee GP required GP has liability

17. Professional Entities Limited Liability Partnership Accountants, Attorneys, Architects Similar to Limited Partnership Used more often by Accountants and Lawyers because “Partner” historically has more prestige Professional Corporation Simpler

18. Segregated Business Ownership

19. Segregated Business Ownership Reasons Remove Liability from Acts of Partners Avoid Being Drawn into Lawsuits Consider forming corporation to make loans to businesses instead of outright ownership Possibly convertible debt Remove Ability of Creditors to go after assets of company Instead, form separate entity to own assets, have those assets rented to main entity Equipment Receivables Possibilities are endless

20. Use of Qualified Plans

21. Qualified Plans Tax Deductible Asset Protection Strategy Bankruptcy ERISA style plans receive unlimited protection IRAs (Traditional or Roth) receive up to $1,000,000 SEPs are not subject to limitations Rollovers are not subject to limitations Non-Bankruptcy only protected to the extent reasonably necessary for the support of the debtor and any dependent of the debtor

22. Types of Qualified Plans to Explore IRAs Roth IRAs 401Ks Simple and SEP IRAs Traditional ERISA Plans 412(i) Defined Benefit Plans 419A(f)(6) Employee Benefit Plans 419(e) Welfare Benefit Plans

23. Captive Insurance Insurance Company formed by client to provide risk coverage Operating Company pays premiums to Insurer, who in turn insures the Operating Company Premiums can be structured to be tax deductible Half of U.S. states have captive enabling statutes Most popular jurisdiction is Vermont Does not have to be offshore, although Bermuda is a popular choice Irrevocable Trust could own captive Move money outside of the client’s estates Best for larger businesses paying over $200,000 a year in premiums

24. Asset Protection Trusts Domestic or Offshore Control can be maintained via the use of client’s entity Just transfer percentage of business to Domestic or Offshore Trust Distributions from company now are distributed to Asset Protection Trust Result is that those distributions are protected from creditors Poor man’s version can be done for married couples using Family Gifting Trusts Reduces costs