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Asset Protection for California Business Owners

San Jose Attorneys Providing Representation to Sophisticated Clients

As a business owner, your assets may be at risk from a broad range of claims by judgment creditors, commercial creditors, and bankruptcies. Your wealth can be lost quickly if you do not protect your assets. You may be able to limit your liability through the way in which you structure your business, the insurance policies that you purchase, the creation of trusts for certain assets, and the funding of retirement plans. If you want to know more about asset protection for California business owners, you should discuss your situation with the San Jose asset protection lawyers at Sowards Law Firm.

Asset Protection for California Business Owners

Even well-run businesses may be sued. While insurance is important, it may not protect you from every risk or provide adequate coverage in case of larger claims. As a business owner, one key strategy to shield your personal assets may involve structuring your business in a certain way. You can protect your personal assets by creating a separate structure for the business. Often, people try to operate their businesses as sole proprietorships to avoid paperwork and formalities. However, a creditor may be able to obtain a sole proprietor’s personal assets to satisfy business debts and claims. To place personal assets beyond creditors’ reach, you may find it necessary to create a C-corporation, an S-corporation, a limited liability partnership, or a limited liability company. Lawsuits against a corporation or limited liability company are claims against the business entity’s assets, rather than claims against your personal assets.

It is important to obtain insurance for the business to protect its assets from creditors as well. When a business is left uninsured, there are a number of potential risks that you may face in the future. For example, if a customer trips and falls on a cracked step leading to the door to your business, you could face a premises liability lawsuit and a judgment. Generally, your insurance premiums are higher if you face greater risks.


Personal assets may be shielded by state exemptions. Among California’s exemptions is the homestead exemption, which protects equity in a home. As of January 1, 2021, the homestead exemption is $300,000, but the amount will increase to up to $600,000 based on the median sale price of homes within a certain county in that year. The amount is also indexed against inflation over time. Certain other property is also protected by exemptions, including specific amounts of equity in personal property, insurance benefits, government pensions, public benefits, tools of trade, and wages.


Trusts are fiduciary arrangements in which a settlor transfers certain assets to be managed by a trustee for the benefit of beneficiaries. Living trusts do not provide asset protection. However, certain irrevocable trusts do. For instance, our attorneys can help you set up a qualified personal residence trust to shield your home from creditors if you are a sole proprietor or if a plaintiff is able to pierce the corporate veil. In a qualified personal residence trust, you transfer either your primary residence or your vacation home to your kids while you are still alive. The home no longer belongs to you, so creditors cannot take it. For a predetermined term of years, you will keep the right to live in the residence without paying rent. The rest of your interest in the residence is preserved for the trust beneficiaries.

Retirement Accounts

Certain retirement accounts are protected in California, while others are vulnerable to collections. Judgment creditors cannot collect funds in pension plans created under the Employment Retirement Income Security Act (ERISA). The ERISA account must be a qualified retirement plan or employee welfare benefit plan that meets certain criteria. When a retirement account does not meet ERISA requirements, judgment creditors may reach the funds in it.

Additionally, California Code of Civil Procedure section 704.115 exempts assets controlled by a private retirement plan. Case law provides that, to qualify, a retirement plan must be principally created and used for retirement purposes, rather than asset protection.

Consult an Experienced Asset Protection Lawyer in San Jose

California is very friendly to creditors’ claims, so it is important to plan ahead to protect your wealth. If you want to explore asset protection for California business owners, you should consult the seasoned San Jose lawyers at Sowards Law Firm. We also represent businesses in Campbell, Mountain View, Palo Alto, Santa Clara, Berkeley, Oakland, Concord, Walnut Creek, San Rafael, Salinas, San Mateo, Santa Cruz, and San Francisco. Call us at (408) 371-6000 or complete our online form.

Client Reviews
I really appreciate the time spent in explaining the process of preparing a Living Trust; the professionalism and friendliness of everyone! I also appreciate the presentation of the materials both binder/print and soft copies. I highly recommend Sowards Law Firm. Karen O'Brien
Ben and team recently helped us with a new estate plan. Their service was timely, thorough, and very professional. They patiently explained concepts we were unfamiliar with. We were very satisfied and recommend their firm without hesitation. Brian Giambattista
Ben was very professional & knowledgeable when tailoring the needs of my end of life documents. I have utmost confidence in his abilities and have no hesitation recommending him for estate management. Janet Burks Giambattista