All of us work hard to provide for our families, and for ourselves. We do it not only to meet our current needs, but for our retirement years and for our loved ones, after we are gone. The last thing that anyone needs is to have some financial misfortune destroy or eliminate all that we have accumulated.
Whether it is as the result of a business failure, an accident which results in a lawsuit, or a major medical crisis, a lifetime of savings can be eliminated in short order.
Whether it is your main source of income or just a serious hobby, an error in judgment or a negligent act by you, an employee or an agent can result in a lawsuit that can take down your “business”. Unfortunately, if you have not separated your business enterprise from your personal assets by forming a corporation or a limited liability company (L.L.C.) , a court judgment could very likely be satisfied by placing a lien on your personal assets.
A corporation or L.L.C. needs to be carefully set up, not only to create a “firewall” that limits your losses (liability) to your business assets (and protecting your personal assets), but to establish the ground rules (shareholders’ agreement or membership agreement) for you and your business partners. Though few people give it much thought at the outset, all business enterprises are destined to end: by death, by retirement, by agreement of the ‘partners’, or unfortunately, by a dispute between the ‘partners’. Therefore, your exit strategy is as important as your decision to form the business.
A popular source of providing a stream of income is the purchase of real estate (other than your homestead) to be used in the thriving rental market, or as a ‘vacation’ site. While the State of Florida protects your homestead from creditors and from most lawsuit judgments, it does not provide the same protection for these additional properties.
A tenant or vacationer, (and their guests), who get hurt while on your property, are probably going to sue the owner of the property. That owner should be your L.L.C. (the recommended choice when it comes to real estate investment) or your corporation, and not you personally.
