For those who own a business, the rewards can be spectacular and not only just in financial terms. You also get to be your own boss and enjoy independence, succeed on your personal, creative terms and can have a more flexible lifestyle schedule because you’re in charge. Protecting your business assets is another major facet of sole ownership and something not to be taken lightly. Check out our tips on safeguarding your company and its precious items of value.
1. Hire A Business Attorney
Before you establish any kind of company and open its doors. You should have a business attorney already waiting in the wings to help you proceed.
For instance, should your business be classified as a corporation, an LLC, a partnership, etc.?
Questions like that one matter and can help a sole business owner understand the advantages and disadvantages when it comes to asset protection. If you have an LLC or Limited Liability Company, this classification combines limited liability protection with a pass-through tax structure. An LLC also shields your home, vehicles, and other personal assets from being used to pay off any debts accrued by your business.
A business attorney is always there if you have questions or need to smooth out any legal messes.
2. Devise A Business Game Plan
When you go into business, both your company assets and personal assets need to be protected. Developing an asset protection strategy is extremely important, and if you neglect to come up with one, you’re doing yourself no favors.
If someone decides for some reason to sue your business, that puts you in a dangerously vulnerable position.
Risks come to every business in a variety of forms, and knowing the risks that can affect your company and how to avoid them will keep you in the driver’s seat.
Some common business risks include competitive risk, economic risk, legal risk, operational risk, compliance risk, and reputational risk.
3. Carry An Umbrella Of Insurance
Protecting your assets requires having insurance even though most of us dislike paying the premiums that come with it and believe it provides little value.
However, carrying three types of insurance can add solid protection to your business assets. The first one to consider is health insurance. And yes, you need that one because it’s the law, and it’s a great lifesaver if you suffer a major illness or injury.
Next, property insurance is key, especially if you have a building. What if vandalism occurs or a natural disaster hits and your brick and mortar structure gets damaged? You would want to recover some of the losses.
The third is liability insurance and features several types of insurance. Imagine the chaos that even one lawsuit could cause in destroying your business finances.
For example, premises liability insurance can help insulate your business from issues that arise if someone falls on your company property and injures themself.
Learn to protect your business assets so that you can save money and grow your profits.
4. Separate Your Multiple Entities
If you own assets, then you should set up a holding company that has no liabilities other than to you personally. The holding company would have no direct interaction with customers of your operating company.
For instance, there are many retail businesses that use an LLC for each and every one of their hundreds of locations.
5. Use Retirement Accounts
Retirement accounts like your IRA and ERISA-qualified retirement plan are outstanding vehicles for protecting long-term savings and providing substantial tax benefits. Your business attorney can help you navigate the laws in your state to see how much protection is provided to funds in these accounts.
For instance, federal law offers unlimited asset protection and up to $1 million in assets in an IRA in the event of bankruptcy.
Let’s be frank. There are tons of frivolous lawsuits out there growing by the day, and it doesn’t matter how savvy a businessperson you become. Just because you are incredible at turning a profit doesn’t mean much if you lack protection for your business assets. Bad things can happen to good people, so be prepared, understand your risks, and have a plan in place.