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Started Your Own Business? You Should Consider Protecting Your Assets! – Here’s How
Breaking free of the confines of a traditional 9 to 5, and being able to call the shots, are just a few of the perks owners get to enjoy However, along with the benefits, business ownership also comes with all sorts of financial risks, like being sued.
If you’re thinking about becoming a business owner, then this article for you! As you embark on the new world of entrepreneurship, you have to know all about protecting your assets. How can you protect your money?
Read on to find out.
Protecting Your Assets With a Strategy
The first step in protecting your assets is to assess what type of assets you currently have commercially and personally.
Personal assets are things like savings, investments, equity in your home, and other things that belong to you with financial value. Whereas business assets are things like equipment, and vehicles your company uses.
One of the reasons your assets can become at risk when you start a business is because your name is attached to your business. Thankfully, a well-thought-out asset strategy will help you separate yourself from your business. If you don’t already have an asset protection strategy, sites like corporatedirect.com can help you develop one.
Separate Yourself From the Company
How can you separate yourself from your new business? It all starts by creating a business entity. You have several choices when it comes to choosing what type of business entity you’d like to use for your company.
For instance, if you’re the only owner, you could move forward with a sole proprietorship. Both sole proprietorships and partnerships offer straightforward structuring. However, you will still be personally attached to the business for legal situations.
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For example, if somebody wanted to sue your business or you ran into an issue with debt, a sole proprietorship wouldn’t protect you from responsibility. To fully separate yourself from your company, look into starting a corporation or LLC.
LLC Protection Laws
A limited liability company, otherwise known as an LLC, separates your name from the business. In addition to separating your assets, LLC protection laws will help legally excuse yourself from a variety of financial situations.
However, keep in mind that having a separate business entity, such as an LLC, doesn’t instantly exempt you from everything. For instance, if you committed some type of crime while working as an owner of an LLC, you could still be liable for the damages.
Avoid Personal Loans
After creating a business entity to separate yourself from the company, the next step is to create a financial plan. Are you going to need loans to fund the future of your business? Most likely, loans are going to be a big part of helping your business thrive.
However, if you want to protect your assets, we suggest you avoid using personal loans. It can be tempting as a new business owner to fund your expenses by maxing out credit cards and taking on all kinds of personal debt.
No matter how tempting it might be, it’s always a good idea to let your company’s finances develop independently from your own. By allowing your company’s finances to develop independently, you’ll be putting yourself in the best possible position if your business fails.
Nobody wants to think about their business failing, however, it’s a reality that savvy entrepreneurs are willing to face. If your business fails, and you’ve taken out personal loans, you’ll be on the hook for getting all of that money back.
If you don’t have the funds for repayment and wind up filing for bankruptcy, you can completely ruin your financial standing. Can you imagine how difficult it would be trying to start a second business after filing for bankruptcy from your first? To avoid this nightmare, always let your company’s finances develop on their own, no matter how slow the process may be.
Setting up Business Insurance
Another way to protect your assets when you own a company is to get adequate business insurance coverage. There are a few different types of insurance policies that business owners will need to familiarize themselves with.
For instance, if your business operates out of a physical location you’ll be required by law to have property insurance.
However, simply having property insurance doesn’t mean that you’re properly covered, or that your assets have the protection they need. Instead, it’s always a good idea to frequently review your commercial insurance plan.
What type of coverages do you have in place to help in the event of equipment loss? Do you have coverage to protect you from employee theft? Are your liability limits as high as they should be?
These are the type of questions you should be going over with your insurance agent before each policy renewal.
It’s also a good idea to review your commercial insurance policy in the middle of its term. For instance, if your business experiences a major change, such as buying new equipment, you’ll want to update your insurance policy to reflect that.
Commercial Auto Policy
Moving on, if your company uses vehicles in any way then you’ll need to invest in a commercial vehicle policy. Even if you’re just using your vehicle for commercial use, it’s a good idea to take out commercial coverages.
Why can’t you rely on a personal auto policy when you’re the sole owner? It all has to do with separating yourself from the business.
If you’re involved in a major accident while doing something for your company, everything you own could be at risk. The car accident victim could come after your assets, commercial assets, and there won’t be a lot you can do to stop them.
Whereas, if you have a sturdy commercial insurance policy with high coverage limits, you could avoid a personal injury lawsuit from happening in the first place.
Build a Solid Company
There you have it! Now you know all about protecting your assets as a business owner. Since separating yourself from the business is the first step, don’t delay in taking this action! Go ahead and take a moment today to decide what type of business entity would serve you the best.
Are you looking at starting a sole proprietorship or would you be best served by an LLC? By arming yourself with the information you need you’ll be able to avoid putting your assets at risk. For more tips, read another article.
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