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Protecting Your Assets Avoiding Day-to-Day Liability Risks Withdrawing Funds from the Business Withdrawal Methods Sales of Accounts Receivable
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PrintSales of Accounts Receivable
A small business owner has a number of withdrawal methods available when seeking to minimize the amount of vulnerable assets within the entity by withdrawing funds from the business.
Still another strategy exists for businesses that generate a large volume of accounts receivable. This strategy is based, in part, on a concept termed "securitization."
The strategy involves the sale of receivables by the operating entity to the holding entity (or to the owner, personally, if no holding entity is used). Cash is paid into the operating entity for the purchase of its accounts receivables, and then quickly withdrawn by the owner as payments for salary, leases and loans, operating expenses, etc.
In this way, vulnerable assets (i.e., the accounts receivable) are not left for any appreciable time within the form of the operating entity, where they would be vulnerable to the claims of the operating entity's creditors (see our discussion of using operating and holding companies).
