How To Protect Your Assets The Right Way
Most people spend more time planning their next vacation than protecting their assets from a lawsuit. In fact, 78% of lawsuit defendants are said to have never expected that it would happen to them, according to Asset Protection Planners. Meanwhile, small businesses have a 33% chance of encountering a lawsuit as defendants. Asset protection is, therefore, vital.
Asset protection isn’t just for the wealthy, as recent reports show that the average income bracket for targeted lawsuits is under $200,000 per year. So, how can your business prevent the risk? Here’s how to protect your assets the right way.
#1 Develop A Solid Business Structure
It’s never too early to start planning. When starting your business, the first step is to structure it properly. You have four structures to choose from, such as a sole trader, company, trust, and a partnership. The simplest option is to choose to operate as a sole trader in small businesses. However, you would have to operate under your own name. This means that you will also be responsible for business debts. As a result, your assets will be at risk if you don’t strategize properly.
Company structures are also easy to scale, which is why it is the most popular choice among startup businesses. It allows you to create a legal entity away from your personal account and offers limited liability to individual shareholders. You may also run your business through a trust, however, it is not the ideal solution as far as asset protection is concerned.
#2 Understand The Risks Of Your Business
It’s never too early to start planning. When starting your business, the first step is to structure it properly. You have four structures to choose from, such as a sole trader, company, trust, and a partnership. The simplest option is to choose to operate as a sole trader in small businesses. However, you would have to operate under your own name. This means that you will also be responsible for business debts. As a result, your assets will be at risk if you don’t strategize properly.
Company structures are also easy to scale, which is why it is the most popular choice among startup businesses. It allows you to create a legal entity away from your personal account and offers limited liability to individual shareholders. You may also run your business through a trust, however, it is not the ideal solution as far as asset protection is concerned.
#3 Create A Solid Security Plan
It isn’t just major organizations that are being hit by cybersecurity threats. However, creating a secure network isn’t a simple one, causing small and mid-sized businesses to skip the level of complexity. According to DSC, there is no one-size-fits-all method whether it comes to security and surveillance systems. As breaches are happening on a daily basis, it’s important to find a security vendor that truly understands your company and how to best protect it from security threats.
#4 Have A Good Business Attorney
Another major strategy to help protect your assets is to have a business attorney in place. Before you start your business, you should already have a relationship established with a business attorney to help you straighten out questions or legal challenges. In fact, a strong connection with your business attorney will help you gain a deeper understanding of the advantages and disadvantages when it comes to setting your business up as a sole proprietorship, an LLC, a partnership, or any other classification.
#5 Choose The Right Business Insurance
Cutting corners to save on costs might save you a few dollars in the beginning. However, insurance protection is essential for the long-term success of every business. Not only should it be one of the first priorities in your budget, but it can also divert a claim filed against you rather than taking your belongings. Having premises liability insurance is a common strategy to protect your business from a lawsuit, especially if an employee or customer injures themselves on your business property.
Liability insurance covers homeowners, business, auto, and malpractice, which can help cover monetary damages during the event of a lawsuit. Not to mention, your liability policy may even save you from paying for legal fees during the process. You never know when something could happen that may provoke a claimant to go after your company. After all, the right insurance can serve as a buffer between your assets and a claim.
#6 Maximize Your 401(k)
Consider adding more funds to your tax-favored retirement accounts, such as the IRA or a 401(k). These funds may help protect you from creditors if you are forced to declare bankruptcy. While it is common knowledge that contributing to your company’s 401(k) plan is a rewarding investment, it will also help protect your investments from lawsuits and creditors at the same time.
Just as there are no guarantees of success, running a business is not without its share of risks. Regardless of the risk level, think about how to best protect your assets now and in the future. This will help save you a ton of financial hardships down the road.
Paula