Protecting a business from personal lawsuit

[profmrzek]

What is the name of your state? IA

From early years I accumulated credit card debt. In the past few years I started a painting business that is starting to actually make some money and have been using it to chip at one of the debts. I have been informed that I am going to be sued for another debt. Right now my business is a sole proprietorship. Would switching to a LLC or a corporation protect my business from this lawsuit? Thank you.

 

[TomD1974]

I would not guarantee that you can protect your personal assets by trying to shelter them under the umbrella of an LLC (presumably by declaring that they are now assets of the LLC), particularly after you are served notice that you will be sued.

You need to discuss this with your attorney because case law in Iowa could help a little in assessing the potential benefits, if there are any.

What kind of money are we talking about here? How much does your painting business make? It really might be better to deal with this straight-up, depending on the circumstances - just try to work our something with your creditor in terms of a payment plan, assuming you can swing that. If he is motivated enough, your LLC strategy might be blown up and you'll go through a lot of time and expense for nothing.