The use of limited liability companies is a way of compartmentalizing assets in a portfolio to reduce exposure. An example is helpful to illustrate the benefits of this planning strategy. A wealthy person owns three apartment buildings. Should a person suffer an injury at one of the buildings where the wealthy person was negligent in the maintenance of the building property, the injured person could sue for damages and the total equity of the wealthy person’s three buildings could be at risk. If the judgment is large enough, the injured person could end up owning the three apartment buildings.

By transferring ownership of the apartment buildings into three separate limited liability companies, the injured person would be limited to the damages equal to the equity in the building where the injury occurred. Of course, the best protection is to maintain the buildings properly and carry insurance, but this example illustrates how the wealthy person was able to protect his equity in the other two apartment buildings.

Return to: Summary of Asset Protection Methods  - at Ourednik law offices in Jacksonville Beach, Florida.

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