If you have ever watched late-night infomercials, you have probably seen some so-called financial guru spouting advice about how to protect your personal property. These experts talk about owning property in the name of a different entity so that it cannot be traced back to you.

In addition, visit any bookstore and you will see financial titles essentially saying the same thing. Look inside and you will see hundreds of pages of text discussing the value of not owning anything in your name. The problem with many of these titles is the underlying premise that you have lots of property or other assets that need protecting in the first place.

Because of this underlying tone, many of us without lots of personal assets assume that the techniques are only for the wealthy in society. In reality, many of the ideas presented in these books and courses are only for the rich because of the way in which the information is given.

However, there are a lot of good reasons for the not-so-rich, or even those who are truly living paycheck to paycheck to have a separate entity in which they can turn. The purpose of this article is to explain the basics of actually creating a separate entity, and to detail the ways in which people who lack lots of money and property can still use the entity in their everyday lives.

Before we begin our journey, it is important to understand that sound business advice should only be obtained from a licensed professional. The information in this article is presented as a reference to get you started on your journey.

Limited Liability Company

The first thing that most people have to understand is that a business entity, regardless of the type, is nothing more than forms that are processed at the local probate court. You do not need an office building or place of businesses to create a separate business entity. In fact, there are many businesses in this country that only exist on paper.

The easiest way for most people to create a separate legal entity is by forming a limited liability company (LLC). An LLC is a business entity which creates a wall of separation between the owners and the business. While one or more individuals form the LLC, the business itself is a complete entity by itself.

Many small businesses form themselves as an LLC for the protection it affords. Because the LLC is a separate entity, if the business is sued, only the assets of the business are at risk. Anyone filing suit against the business cannot go after the assets of the owners of the company.

What also makes an LLC more attractive to smaller businesses—as well as individuals using LLC’s—is the way in which it is taxed and regulated. LLC’s have the advantage of pass-through taxation. This means that the profits and losses of the LLC can be recorded on the tax return of the owners, rather than on a separate tax return for the business. This, of course, saves paperwork and time for the owners of the entity.

Forming an LLC

An LLC is formed with what is known as articles of organization. These articles are essentially the same with most businesses. Some may have a few extra specifications depending on the number of people forming the LLC.

The articles of organization simply spell out the name of the business, who owns the businesses, and the address where the owners can be contacted. They also state that the business is separate from the owners, and that the owners cannot be held liable for the actions of the company—unless the actions are known to be fraudulent.

Typically for the reasons that you would be forming an LLC, the articles of organization will be two to three pages at the most. However, it is these two or three pages that will create the separate entity that you can use in your everyday life.

Once the articles of organization are put on paper, they must be registered with your local probate court. This usually involves taking them to the probate court and paying a county and state fee to register the LLC and record the document.

Depending on the area in which you live, there may be taxes imposed on the LLC. There may also be rules regarding whether you need to obtain a business license for your new entity. You will need to consult your local business laws and regulations to determine if this applies to your situation.

Real World Uses

Now that you have gone through the relatively easy process of creating your separate entity in the form of a limited liability company, it is time to use it in your everyday life. Well, believe it or not, having access to a separate entity can make your life a lot easier.

One way that your LLC can help is on your resume. Let’s assume that you have been out of work for a while and need to explain this to potential employers. Well, you can state that you have owned and operated your LLC. Or, if you simply want to list yourself as an employee, simply give yourself a title and explain what you do for your limited liability company. No one has to know that you are the owner of the LLC, and for that matter that the LLC really doesn’t do anything.

Another way to use the LLC is for your own credit report. If you are someone who regularly moves from one job to another, or do a lot of freelance work, you can list your LLC as your employer on credit applications. The advantage to this is that credit card companies look very heavily at your time at one job. By listing the LLC as your employer on everything, you are telling the credit bureaus that you have kept the same job for years. This will increase how favorably you appear to potential creditors.

Speaking of credit, you can actually use your LLC to obtain credit. Now, this is much harder to use when your LLC is fairly new. However, after a few months of existence, your LLC will actually start receiving credit card offers from companies. The longer the LLC has been in business, the better the offers will become.

The key to all of these techniques is to keep your LLC active. This usually means paying a tax every year on the LLC, and sometimes filing forms with the state. The process is usually very easy, especially considering what you are building by keeping the LLC active.

In addition, people who are savvy about using separate businesses entities for their own purposes sometimes form more than one. You may find that after using these techniques that having a couple of LLC’s to fall back on is right for you.

The bottom-line on all of this is that the rich use these methods all the time to protect themselves and their property. There is no reason why the rest of us can’t use the same techniques!