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Wyoming LLC for asset protection

Discussion in 'Estate Planning, Creating Wills & Trusts' started by gerard2006, Mar 2, 2020.

  1. gerard2006

    gerard2006 Law Topic Starter Member

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    Jurisdiction:
    Wyoming
    I am a regular W-2 employee and have no business today. I live in NYC and planning to form a Wyoming LLC purely from an asset protection standpoint. In this LLC, I plan to initiate some basic CD's with banks in different states wherever I can get a good interest rate, maybe the Fidelity brokerage account. I will also be adding an investment into a passive real estate apartment syndicate which itself is under the construct of an LLC and my liability in that LLC is only limited to the extent of my investment. I've found a good company to do the legwork and for a few hundred for initiation and maintenance every year, they become my registered agent. My main case for asset protection is I've had friends and neighbors get targeted with frivolous lawsuits - things like folks slipping on sidewalk or one uninsured handyman injuring himself while working on a home depot rental wood working machine (very hard to find bonded and insured workers in NYC). Although I can also establish umbrella insurance, the costs for this are far higher as you have to get a much higher auto insurance coverage to even be eligible to get umbrella. In a nutshell, I'm trying to transfer as many personal assets into a Wyoming LLC


    Questions
    - I know nothing is fool-proof (not even cook's island trusts) but I've also heard cases where attorneys don't really want to go up against Wyoming LLC's because of the single member charging order protection and hence they are more likely to settle out of court. Any opinion?
    - Since I'm not really conducting a business and simply investing in CD's and passive real estate, does that really constitute a business that'll require me to register the Wyoming LLC in NY as well as a foreign entity?

    Thanks
     
    Last edited: Mar 2, 2020
  2. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Now you are spamming here. TAKE THE .com links out.
     
  3. gerard2006

    gerard2006 Law Topic Starter Member

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  4. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Great.

    1. How effective creating an LLC depends on what you want to protect against.

    2. Other than protection, real or imagined, I can't see any reason for you to create an LLC in WY or anywhere else.
     
  5. gerard2006

    gerard2006 Law Topic Starter Member

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    Few things I'd like to protect against - folks slipping on sidewalk in the winter even though I cleaned it, uninsured handyman injuring himself on my property (impossible to find licensed or bonded workers, they are all union and hired by large corporations), any other frivolous lawsuits. I only started thinking about this a month ago when a close friend and the next door neighbor got hit with lawsuits due to one of the above reasons

    Has anybody seen case law where a Wyoming LLC has held well in court or do judges literally state that if the case is filed in NYS and the plaintiff and defendant are both in the same state are in NY that NY law should apply and totally disregard my Wyoming LLC

    As I said earlier, I'm not looking at fool-proof protection but if spending under $300 a year gives me some sort of protection, I see that as a good option. And again, I don't have a business at all

    Thanks
     
  6. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Since the LLC isn't going to be doing any business or have any sort of location IT isn't going to be sued for anything. So I assume you are thinking the LLC will protect the assets in the LLC if YOU are sued.

    You are wrong. The LLC and assets held by the LLC are still going to be assets that you own just like that $100.00 bill in your wallet.
     
    army judge likes this.
  7. gerard2006

    gerard2006 Law Topic Starter Member

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    Your understanding of my thoughts on this are correct. I've read that Wyoming single member LLC's have charging order protection to safeguard any investments held under that from the hands of creditors which is what gained my interest with it
     
  8. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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  9. gerard2006

    gerard2006 Law Topic Starter Member

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    And that's exactly what I'm looking. Protect CDs, brokerage accounts and passive real estate all under a single Wyoming LLC
     
  10. adjusterjack

    adjusterjack Super Moderator

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    You're overlooking something. Google the concept of "piercing the corporate veil." In a one man LLC you are vulnerable to that because you, the individual, are the face and name that everybody will associate with your activities.

    You will always be liable for your own negligence that causes injury or damage to others.

    You may be required to provide personal guarantees to lenders and others with whom you do business.

    And nothing prevents you from being sued in your own name regardless of your LLC. You may have a defense but defending against a lawsuit is going to be quite costly.

    Oh, one more thing. You want financial assets IN your LLC. Well, guess what, when there is a judgment against the LLC, those assets that are owned by the LLC can potentially be seized to satisfy that judgment.
     
  11. gerard2006

    gerard2006 Law Topic Starter Member

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    I agree with what you are saying and have done research on piercing the corporate veil. However, what helps is keeping good records, filing articles every year, filing state dues, etc. Also, Wyoming LLC does offer a single member LLC the same rights as multiple members when it comes to it's charging rights policies. In addition, it offers complete anonymity so folks looking to find assets under my name will not find them. Again I'm not looking for anything fool-proof because I'm quite certain this isn't certain but want to see if I can get some consensus that taking this path offers some protection vs investing everything at a personal level

    Text from a wiki article and I'm not allowed to publish domains here because of spam fears, so just copy/pasting and you can google up this exact text to find the site if you like

    Even though the LLC strategy does not provide bulletproof asset protection, it certainly makes it more difficult for litigants to seize an individual's personal assets. By raising the costs of litigation and the cost of collection, LLC formation discourages potential litigants from suing in the first place. Forming an LLC is not very costly, making this a highly cost-effective strategy for individuals worried about liability risk arising from their business operations.



    Thanks
     
  12. adjusterjack

    adjusterjack Super Moderator

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    Are you out to screw people? Is that why you are so concerned about "protection"?

    People go for years doing business, making investments, owning property without ever having an LLC.

    Heck, I had three rentals for 20 years, never had an LLC.
    I was in business selling auto accessories, never had an LLC.
    I was a private investigator for several years, never had an LLC.

    Always had the proper insurance and comported myself properly with others and never lost a minute of sleep.

    Just what is it you think you need protection from?
     
  13. Tax Counsel

    Tax Counsel Well-Known Member

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    The charging order will attach to any distributions that the LLC would make to you. While that might not immediately give the creditor access to what the LLC holds, it also means that while the charging order is in place YOU can't get any assets from the LLC either. So eventually you'd have to satisfy the creditors before when you want to take anything out of it. And all the while interest on the judgment will pile up.

    And if you use the LLC as essentially an extension of your own finances the creditors can use that to break through the LLC barrier. If the LLC is not conducting business but is essentially just an extension of your private finances that may create a risk for you in that regard.

    Note too that the state law won't protect you against the creditors forcing you to bankruptcy court and the bankruptcy court, being a federal court acting under federal bankruptcy law, could force the transfer of your interest or liquidation of the LLC and thereby allow your creditors to reach the assets inside it.

    So while it puts some hurdles for creditors to reach the LLC assets, it also limits you too. This is why you don't see more people doing it.
     
  14. gerard2006

    gerard2006 Law Topic Starter Member

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    Got it. I know bankruptcy court is tough so that's a given that I'll lose

    For the charging order, yes the delay in distributions is a waiting game and hopefully it'll get the creditors onto the negotiations table quicker

    Having said that, what I'm hearing here is this isn't worth the hassle. Do I have other better options? My umbrella insurance provider stated that they will only cover what my home insurance provider covers which isn't much and excludes things like domestic help and unlicensed handymen

    Thx
     
  15. adjusterjack

    adjusterjack Super Moderator

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    Then look in to business insurance for anything that isn't covered under your personal policies.
     
  16. gerard2006

    gerard2006 Law Topic Starter Member

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    All the searches on google for handyman insurance or domestic help points to results for the businesses that actually operate and provide these services. I'm only using them. Can you help me find the type of insurance you are alluding to? Thanks
     
  17. adjusterjack

    adjusterjack Super Moderator

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    Make sure the people who perform services for you have insurance and are actually in business and, preferably, have licenses.

    Might cost you more than hiring some Joe off Craigslist, or the Home Depot parking lot, but if you cut corners like that they become your employees. You can be sued for their negligent injury or damage to others and you would also be responsible for payroll taxes, unemployment taxes, and workers comp insurance.
     

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