As a business owner, you are probably aware that running a business comes with plenty of risks and pitfalls. Apart from generating more profits, you should also safeguard yourself from potential claims and lawsuits.
Claims for damages by the employees, product liabilities, and even mortgage obligations to vendors and third parties are a few reasons why you should employ some asset protection strategies for your business.
Primarily, asset protection refers to a set of legal methods that can be used for protecting assets of individuals and business entities from a variety of risks.
Thus, if you consider using asset protection, keep reading this article to know everything about the subject matter and how it can be important for business owners.
Reasons Why Asset Protection Is Important For Your Business
The importance of asset protection can be based on the fact that it can help business owners, like you, to protect their respective companies and assets from the unexpected and the unforeseen. For instance, below are a few reasons why you may need to consider asset protection for your business:
i. Safety From Creditors
The first reason why you may want to consider using asset protection strategies is that your company’s assets may be seized by another party or creditors. In some cases, asset protection could help business owners to keep their assets safe from creditors.
ii. Ability Of Your Business To Keep Going
Another reason why you may want to think about this is that you need to get help with making sure that your business is going to be able to continue.
You may need to employ some asset protection strategies to help you get through the rough patch and get back on track. This is especially true if your business needs to satisfy a lot of monetary judgments.
Typically, it is important for you to realize that you can’t stop the creditors and other judgment holders from taking the assets you’ve worked so hard to earn. Fortunately, you can make your assets become more valuable, as well as protect them for future generations by taking steps to make sure they are well protected from start to finish.
Essential Asset Protection Strategies For Business Owners
Realistically speaking, running your own business successfully can be very important to you and your family. Hence, you’ll do everything in your power to preserve it for your loved ones even after your passing. This is where asset protection strategies come to the rescue.
Now that you know how asset protection can protect your business, below are a few strategies to consider from the get-go:
1. Pick The Appropriate Business Structure
If you are starting a new business, it is best to think about its formal legal structure to protect your company from any potential risks. Luckily, there are plenty of options to make sure your business is safeguarded for the benefit of your family’s future generation:
a. Limited Liability Company – By incorporating your business into a limited liability company, you can form a separate legal entity that allows you to shield your business from personal liability if someone files a lawsuit against your company.
b. C Corporation – Choosing this business structure means you can separate your company assets from your personal assets. In case someone sues your business, they can’t run after your personal properties just to satisfy a monetary obligation.
2. Establish A Trust
Another asset protection strategy you can use for your business is to establish trust. This means that you’ll place your business assets in the trust account, which will be under the control of the trustee.
Not only that but establishing a trust gives you the opportunity to create a distinct and separate identity for all your properties placed under the account. Consequently, when someone files a lawsuit against your business, all the assets and properties in the trust account will be well-protected.
3. Get Your Business Insured
Apart from getting health or life insurance, it is also important to get your business insured for protection against claims and lawsuits. You can do this by obtaining a liability insurance policy, which can help protect your business assets in case you lose the case and have to pay a huge amount of money.
However, if you want to get the most out of this insurance option, you should speak with a financial representative to help you find the best coverage for your business.
4. Separate Business Transactions From The Personal Ones
Even if you haven’t incorporated or formalized your business structure, you should, at least, consider separating business transactions from personal ones.
This process can include using separate business bank accounts from your personal accounts. Not only that, but you should also find time not to withdraw money from your business account to pay for some personal items.
By doing this, you can potentially reduce any liability that you may have against your business, as well as manage your business finances quickly.
5. Know Which State Laws Can Protect Your Business From The Creditors
Another asset protection strategy that you may use for your business is to get familiar with what state laws can safeguard your company from creditors.
For instance, federal law may help shield certain retirement assets if your company will be liable for some monetary obligations.
All you need to do is go through the laws and understand them. That way, you can ensure that everything you’ve built, including your qualified retirement plan, will be safe from creditors and other risks.
Being a business owner is never easy. Aside from running it more efficiently, you should also protect them from any liabilities that you may have to deal with.
Just like other assets you have, you need to safeguard your business to ensure your family’s financial future even after your demise. This is one of the primary reasons why you should consider using asset protection strategies.
Fortunately, by keeping all the information mentioned above, you’ll know how important asset protection is for business owners, like you. But, if you want to better understand this matter, you should hire a reliable lawyer who can offer you valuable legal options.
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I am Adeyemi Adetilewa, a media consultant, entrepreneur, husband, and father. Founder and Editor-In-Chief of Ideas Plus Business Magazine, online business resources for entrepreneurs. I help brands share unique and impactful stories through the use of public relations, advertising, and online marketing. My work has been featured on the Huffington Post, Thrive Global, Addicted2Success, Hackernoon, The Good Men Project, and other publications.