Fraudulent conveyance and the LLC.

DELAWARE CORPORATION VS. WYOMING CORPORATION

Delaware Corporation or Wyoming Corporation? Delaware Corporation or LLC?

FRAUDULENT CONVEYANCE CONVEYANCE
A creditor can claim fraudulent conveyance if you deliberately frustrated, delayed, hindered or defrauded the recovery of assets to pay for a legitimate debt. “Gifting” assets to family or a business associate to avoid paying a debt is an example of fraudulent conveyance. The creditor can ask the court to undo the “gift”, or asset transfer, and place the asset back in your hands. The creditor then takes your control of that asset to satisfy the debt. That’s a simplified explanation of fraudulent conveyance.
Transactions intended to protect assets don’t run afoul of fraudulent conveyance issues if structured correctly. Consider these examples:

member interest

An asset is placed into the LLC for the member interest in the LLC. This is considered a "for value" exchange.

business relationship

A privately controlled corporation serves as a supplier to your current business operation and as a friendly creditor. This is best served through a business relationship that existed before the hostile creditor claim. Aged corporations function nicely in this area.

IT'S DIFFICULT TO TRIGGER A FRAUDULENT CONVEYANCE CLAIM WHEN ASSETS ARE EXCHANGED FOR VALUE.

To avoid a possible fraudulent conveyance claim, consider the following issues:

Timing

Move the asset before the threat. Transfer the asset to the corporation or LLC before the threat is even foreseeable. As time passes, the asset transfer increases it’s safer from a potential fraudulent conveyance claim.

Solvency

It’s critical that you’re able to meet your financial obligations after the asset transfer. In other words, you can’t instantly accumulate thousands in unsecured and other debt, and immediately run off with the money.

Communication

Keep quiet about your holdings and how they are controlled. Many times, it’s a best friend, a jealous ex-lover, hostile spouse or frustrated business associate that turns on the debtor and blazes a trail of financial disaster.

Fair Market Value

You can’t sell a $100,000 real estate property to a sibling for $10,000. It’s suspicious. Transactions must make sense and follow standard business procedure, reasoning, and documentation. Follow the 70% rule. When transferring assets, make certain it’s for at least 70% of its fair market value.

Appearance & Intent

If it walks, acts and quacks like a duck, it’s not a goose. Transactions must look reasonable from all directions. Ask yourself these questions about the debtor: