Family LLC and Physicians

A family Limited Liabiilty Corporation (LLC) is an excellent asset protection planning tool for Physicians and Dentists. A family LLC is a term, which is simply describing an LLC that is owned by a physician and his/her family.

A family LLC differs with a normal LLC because a Family LLC utilizes voting and non-voting membership interests. With a normal LLC, the owners of the LLC own one type of stock-voting stock/membership interests. The purpose of a Family LLC is asset protection. A Family LLC is similar to a Family Limited Partnership except that a Family LLC is simplier and less complicated.

The concept behind a Family LLC is to convert an individual asset into a business asset that is owned by multiple parties other than just the Physician. For example, Adam is a Surgeon and his wife, Sue, own a Family LLC, which owns their CDs, Mutual Funds, and Stock portfolio with Adam and Sue owning each 1 percent of voting Stock in AS, LLC and each own 48 percent each as non-voting stock while their adult children each own 1 percent of non-voting stock in AS, LLC.

Under the above scenario, the goal is to transfer assets that are at a high risk from being seized during a lawsuit or a judgment. The goal is simple, which is to change the title of the assets and make those assets untouchable in a lawsuit. With multiple people owning the LLC, a creditor would have a difficult time collecting the assets owned by AS, LLC.

Furthermore, with a Family LLC, the sole rememdy that a creditor has is a charging order, which gives the creditor the ability to receive any distribution that the Physician would receive. Thus, the creditor has a tax liability because they are responsible for paying taxes on any profits from any distributions that were assigned to them that should have gone to the physician. This creates a big liability for the creditor and gives the creditor an incentive to go away or settle the dispute for a small sum of money.

The true goal of asset protection is to place your assets beyond the reach of a creditor. Thus, you want the creditor to avoid any collection activities because the payment of attorney's fees and their costs exceed the liklihood of any collection efforts.

Sean Robertson is an Asset Protection Attorney for Physicians and Dentists in Cook County, Illinois. Sean Robertson can be reached at (312) 498-6080 or Sean@RobertsonLawGroup.com.