Q: I’m based in New Hampshire. I have hundreds of thousands of dollars worth of assets that I have amassed over the years that I do not use in my business. This includes vehicles, stocks and bonds, paintings, Persian carpets, and other valuable furnishings.
Should I put these assets in a New Hampshire LLC to protect them from property protection in the event a third party ever sues me and makes a claim that exceeds my insurance? Should I bring them to an asset protection company? Or should I just hold it in my own name and not put it into an entity? And if I form an Asset Protection LLC, should it be Nevada LLC or New Hampshire LLC? I’ve read that Nevada is the best jurisdiction for asset protection LLCs and companies.
Answer: The short answer to your question of whether to start a New Hampshire LLC to protect assets is yes. But as I’ll explain below, the matter is complex.
The main reason you should consider forming a New Hampshire Asset Protection LLC is because, like other US LLC laws, the New Hampshire LLC Act not only provides legal liability protection under Section 23, but also a specific form of the statutory asset protection with the name “Load orders. “The provision of the Fee Regulations for the New Hampshire LLC Act is Section 126.
Section 126 essentially provides that if a obligee has an unsatisfied judgment against a debtor who is a member of a New Hampshire LLC, the obligee cannot obtain a court order requiring the obligee’s LLC membership to satisfy the debt on the obligee transfers even if the debtor holds most or all of the assets in their LLC. Rather, the only thing the obligee can do is get a court order (a “debit order”) that any LLC distributions of cash or other assets that would normally go to the debtor must instead go to the obligee in the amount of the unsatisfied debt plus interest. Under Section 126, creditors can choose not to sue their debtors’ LLCs at all, or they can enter into debt compromises that they would otherwise never consider.
However, before deciding to form an Asset Protection LLC, there are a few considerations to consider:
– If you are forming an LLC as an Asset Protection LLC, it should be a multi-member LLC, not a single-member LLC, as Section 126 states that fee mandate protection is much stronger for multi-member LLCs than for LLCs with a member of LLCs. And as I wrote earlier in this column, multi-member LLCs offer better asset protection than single-member LLCs, aside from fee order considerations.
– A spouse is often the ideal member of a New Hampshire Asset Protection LLC.
– As I wrote in this column, every LLC, whether it is a single-member LLC or a multi-member LLC, should have a well-planned and well-crafted operating agreement. These agreements can be expensive, but are especially important for members of asset protection LLCs. A competent New Hampshire LLC attorney will likely charge $ 750 or more for a company agreement with a member of LLC and $ 1,500 or more for a company agreement with multiple members of LLC.
– If you hire a tax advisor for your taxes, the accountant may charge significantly more for annual federal and state tax returns for a multi-member LLC than for a single-member LLC. Since your Asset Protection LLC’s tax returns are likely to be straightforward, consider using TurboTax or a similar program to file these returns yourself.
– The legislative intention of the collection of orders is to ensure compatibility between the members of an operational LLC, since a loss of compatibility between members in such an LLC – e.g. B. when a creditor becomes a substitute member – the LLC can damage or even destroy business. Based on this legislative intent, it is possible – although I consider it unlikely – for a court in New Hampshire to rule that a creditor of a debtor who is a member of a Multi-Member Asset Protection LLC is not entitled to protection precisely because the debtor’s LLC is not an operational LLC and therefore no compatibility between members is required.
– If you do elect to set up a non-corporate entity for fee mandate protection, it should be an LLC rather than a government partnership or limited partnership. This is because the ownership and management structure of a limited partnership is significantly more complex than that of a multi-member LLC, and you will not get legal liability protection under government business partnership. And it shouldn’t be a company, as companies except in Nevada don’t offer fee mandate protection.
– You should incorporate your Asset Protection LLC under the New Hampshire Act, not the Nevada LLC Act. This is because New Hampshire courts can assume that you set up your Nevada property protection to make the work of your creditors, unless you have a material Nevada connection. If a New Hampshire court takes this view, it may use its fair powers (that is, the courts’ inherent power to override any otherwise applicable law or jurisdiction in the interests of fairness) to rule on your behalf. And if you are sued in Nevada, you will have to hire a lawyer in Nevada to defend you and you may have to travel there – possibly repeatedly – to testify.
– As you may know, New Hampshire law provides for powerful asset protection trusts. In my opinion, New Hampshire LLCs are probably more useful than New Hampshire Trusts for asset protection to most New Hampshire residents. However, this is a complex topic that I will address in a subsequent column.
In short, while New Hampshire Asset Protection LLCs may not be completely bulletproof, many New Hampshire individuals and families with valuable non-business assets should consider incorporating one.
John Cunningham is an attorney from McLord Middleton, PA, Concord, NH. His practice focuses on LLC formation, general business and tax law, advising clients under IRC Section 199A, and estate planning. His phone number is (603) 856-7172, his email address is [email protected], and the link to his website is www.llc199A.com.