How to Protect Your Assets

One of the keys to learning how to protect your business and personal assets from lawsuits is to understand how lawsuits work. The proceedings of a lawsuit can be broken into six simple steps.
 
Step 1
Injury or Loss
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The beginning of a lawsuit is an injury or loss of some kind. To protect our individual rights, there needs to be a legal system that holds people responsible for their actions when they cause injury to another. Not many people would object to this idea. However, in the United States today there are few lawsuits which apply this principle. There are over one hundred million lawsuits currently pending in the courts, and it is estimated that a new lawsuit is filed every thirty seconds. There are nearly one million attorneys in America, and 100,000 new attorneys graduate from law school each year. There are not enough good cases to support this workforce of attorneys; therefore, in order to stay in business, attorneys must find people with assets to sue.
 
Step 2
Find a Defendant(s) Who Can Pay

Most lawsuits are done on a contingency basis, so one of the first things an attorney does before accepting a case is to perform an asset search to see if the defendant would be worth pursuing. Attorneys search for a candidate with substantial personal and business assets available for seizure and/or significant insurance coverage. All too often, people are named as defendants in a lawsuit because of their ability to pay, not because of fault or error.
 
If you have assets that can be seized through a judgment, you are a potential target for these trial attorneys. On the other hand, if you don’t have assets that can be seized to satisfy a judgment, you became a very unattractive target for a trial attorney. To protect your assets from lawsuit, you will want to have your assets in legal entities such as LLCs (Limited Liability Companies) and FLPs (Family Limited Partnerships). With your assets in properly drafted and funded LLCs and FLPs, the attorney’s asset search will find no assets that can be taken through a lawsuit.
 
Step 3
Construct a Theory 
of Liability

protect assets insights 2.jpgIf the person immediately responsible for the loss or injury does not have the ability to pay, the attorney will search for a deep-pocketed defendant and a theory of liability that can be developed against him or her, showing why that defendant should be held responsible. The success of the trial attorney is dependent upon this. Trial attorneys make up one of the largest lobbyist groups in the country and have created laws to increase the level of vicarious liability. Vicarious liability means you can be held responsible for the actions of others. Trial attorneys have worked hard to ensure that whoever has the money can be held responsible for negative outcomes through vicarious liability, even if they committed no wrong.
 
One example of this is called premise liability. Premise liability is a law that was lobbied for by trial attorneys. This law states that the owner of a property is responsible for any injury or loss that occurs on that property. This is why you see lawsuits where a homeowner is held responsible when a robber is injured while robbing a home. The homeowner did nothing wrong. The robber was trespassing and stealing but