Starting a business is an exciting adventure filled with many unknowns. However, one thing you can be certain of is the importance of protecting your personal assets. There are many situations in which asset protection is essential. For instance, if your business is the target of a lawsuit or you need to file for bankruptcy, not having asset protection strategies in place could result in a significant risk of losing your assets. In this blog post, we will discuss four simple asset protection strategies that you can use to safeguard your new business venture.
4 Simple Asset Protection Strategies to Use When Starting a Business
Establish a Limited Liability Business Entity
Starting a new business venture can be a thrilling experience, but taking steps to safeguard your assets from potential risks is essential. Establishing a limited liability business entity is one of the most effective strategies you can use to protect your assets.
By default, an individual starting a business is considered a sole proprietorship, while multiple people starting a business together are considered a partnership. While these structures are simple to create, they do not legally protect the business owner’s assets. In contrast, business structures such as limited partnerships, limited liability companies, and corporations provide some liability protection to their owners.
A properly established and maintained limited liability business structure restricts liability to assets belonging only to the business. This means that the business owners are not usually personally liable for any judgments or debts against the business.
Buy Adequate Insurance
In the world of business, unexpected events can occur at any moment. That’s why it’s important to have a safety net to fall back on. But, of course, one of the best safety nets you can have is adequate insurance coverage.
Insurance policies allow you to transfer the risk of potential losses to an insurance company. In other words, if your business is sued or you experience property damage, your insurance policy should cover the costs of a covered loss. This can save you from paying for damages out of your own pocket.
For instance, imagine you’ve started a landscaping business, and while working on a client’s yard, you accidentally damage their property. With general liability insurance, the insurance policy will cover the cost of the damage. Without insurance, you would be personally responsible for covering the damages.
Keep Your New Venture Separate from Your Current Ventures
If you already have other business ventures or personal assets, keeping them separate from your new business is important. This means establishing separate bank accounts, credit cards, and financial statements for your new business. This not only helps to protect your assets but also makes it easier to manage your finances.
For example, let’s say you own a real estate investment company and decide to start a software development company. Using the same bank account for both businesses can be challenging to track which expenses are for which business. It can also make it easier for creditors to come after both businesses if they’re in the same bank account.
Keeping your new venture separate from your other assets also ensures that you’re not personally liable for the debts or obligations of the new business. This separation is important, even if you’re the sole proprietor of your new venture.
Take Advantage of Trusts
Trusts are legal entities that hold assets for the benefit of others. Different types of trusts suit various purposes, from revocable to irrevocable trusts. One type that stands out is the asset protection trust, specifically designed to safeguard your assets from lawsuits, creditors, and other legal claims.
By transferring your assets into an asset protection trust, you can shield them from potential risks and enjoy greater peace of mind. This is especially important if you have a business facing legal challenges. With an asset protection trust, you can rest assured that your personal assets are secure, even if your business encounters legal troubles.
Talk to an Asset Protection Attorney to Get Your Business in Order
Implementing these asset protection strategies can help safeguard your new business venture, but it’s important to remember that every business is unique. Therefore, working with an asset protection attorney is essential to determine which strategies are best for your specific situation.
An asset protection attorney can help you evaluate your risks and develop a comprehensive asset protection plan that meets your needs. They can also provide guidance on compliance issues and ensure that your business is following all relevant laws and regulations. In addition to working with an attorney, it’s important to regularly review and update your asset protection plan as your business evolves. This includes regularly reviewing your insurance policies, updating your business structure, and ensuring that your assets are properly titled and held. Contact Saltiel Law Group at 305-735-6565 to schedule your appointment.