Monthly Archives: December 2013
Whether you’re a seasoned business owner with years of experience, or you’re just starting out as the owner of a business, you likely understand the risks and the concept that your business may not be a success. It’s an unfortunate reality of business ownership, but it’s important to take that reality into consideration, and follow the proper steps to protect your personal finances from the downside risks of being a business owner. It’s not like a game of Roulette, you need to take this very seriously and not gamble on your future.
Create the Appropriate Entity
Many business owners opt to go the route of operating as a sole proprietorship because it’s simple, but this isn’t often the best way to protect your personal assets. If you operate in this manner, you’re exposing your home and personal property to potential lawsuits and financial liability.
It’s best to operate a business under the protection of a corporation or limited liability company. If you do create an LLC, it’s also best to include the name of at least one other individual, whether it be a spouse, or someone else, to prevent the ability to prove that an LLC and an individual are the same.
Separate all Finances Accordingly
Keep business and personal finances completely separate. The documentation of a separate entity doesn’t provide enough protection—instead, use your company name on all documents, maintain separate accounts, and keep all documentation up-to-date and accurate.
Limit Ownership of Assets
As a business owner, it’s always a good idea to try and avoid outright ownership of assets. For example, lease when possible, because this leaves fewer assets open to the potential of seizure.
Maintain Adequate Insurance
Often, business owners will feel a false sense of security because they hide their personal assets or create an entity, but this is not adequate to protect personal assets. Instead, business insurance will give you protection against people who may be after your assets. Rather than targeting your personal assets, they can instead target your insurance policies.