This system was designed to provide a simple, legal, and effective way to establish a business entity and to open a bank account on behalf of that business entity. The basic system was not intended to provide an effective method of reducing taxes, or of protecting your assets. This is because the basic system names you, the client, as the owner of the US LLC.
Asset Protection can be a very complicated affair, but to put it briefly, it involves separating your assets from your liabilities so that creditors cannot seize those protected assets. In order to separate your assets from your liabilities, you must usually establish a “separate” entity that will legally protect those assets from your creditors. Great care must be taken to insure that these entities are not simply considered “alter egos” or “sham entities”
that will provide no protection whatsoever. Simply putting your assets into a business entity or trust while naming yourself as ultimate owner may provide no protection whatsoever since the creditors can simply take your rights in the entity. This should be avoided. The good news is that it can be avoided.
It is possible to obtain significant asset protection benefits using this system, but the ownership of the shares will need to be vested in an entity that is located in a friendly jurisdiction (usually a trust located in a friendly common law jurisdiction like the Bahamas).
The ownership of the shares will need to be structured carefully so that the entity is NOT a “sham entity” or an “alter ego” entity. We suggest using The International Privacy Trust located out of the Bahamas.
Such a trust can provide significant tax and asset protection benefits if structured properly.