Our manufacturing client used company-owned machinery, equipment, and real estate in its operations. The owners of the company became concerned that future accidents could result in a lawsuit and large judgment against the company and the loss of much of the machinery, equipment, and real estate.
We recommended two steps to provide greater protection:
- Review the company’s liability insurance to ensure adequate protection was provided; and
- Transfer the physical assets to new entities owned by the same owners of the company. We created a limited liability company to hold the real estate and lease it to the operating company and a second limited liability company to hold the largest pieces of machinery and equipment and lease them to the operating company.
By siloing assets into different entities, the assets of the operating company and each of the limited liability companies are properly insured and are generally shielded from any future liability of the other two entities in excess of the available insurance.