Many people aspire to be businessmen and entrepreneurs, but not many have a full grasp of just how cutthroat the world of business can be, especially in a post-pandemic world. To find success, start-up owners have to be relentless, and it also involves stopping at nothing to ensure that their personal assets are protected. Smart entrepreneurs know that not all businesses and investments pan out the way we want them to, and we need to protect the assets we do have if we want to secure our future and that of our family.
One of the best things you can do for yourself and your family is to put safeguards on your assets before you open a business. Here are some pointers to help you do this:
Set up the right business entity
Here’s one thing you need to remember if you have plenty of assets to protect: Operating as a sole proprietorship is not in your best interest. This is because when you opt for a sole proprietorship, you make your personal assets vulnerable to potential lawsuits in the future. To protect your assets, opting for a limited liability company (LLC) or an S corporation will be a crucial step in protecting what’s yours and in establishing your business.
Establishing the right business entity will keep your personal assets as safe as possible if you find yourself having to file for bankruptcy or having to consult with a reputable foreclosure lawyer to shield your property.
Place other assets in your spouse’s name
The general rule is that your creditors cannot reach the separate assets of your spouse. This is a loophole you can get around, especially if one of you has a riskier lifestyle or profession, one that can potentially expose or risk your valuable assets. Asset protection is one of the benefits of marriage, and a prenuptial or post-nuptial agreement can be incredibly beneficial for this strategy.
Don’t scrimp on business insurance
Business insurance should always be a priority. Not only is it required by law depending on the state, but not having the necessary insurance could also result in your business being fined, excluded from public contracts, and even being served criminal or civil penalties. All these consequences can result in costs even bigger than what you would have spent on business insurance.
Here are some benefits of having the right business insurance:
- Business insurance helps your employees gain access to benefits like workers’ compensation, disability, and unemployment. It helps protect the people in your team, so having the right insurance is also the best way to create goodwill between you and your employees.
- Insurance helps keep your business operating, especially in the event of a natural disaster or other unexpected emergencies. Insurance can help protect your property and equipment from damage caused by an earthquake, storm, or flood, and others. Some insurance companies call these events “acts of God,” and therefore covered by certain policies. There are even insurance policies for active shooter incidents, so you can choose the right one for your business depending on the threats your area might be at risk for.
- It provides your business with the ability to manage untoward incidents, and gives future plaintiffs another entity to target or hold liable.
- There are business insurance policies that can also help guard human assets—like you, as the owner. You can be referred to as the “key person” or “key man” in the policy, which means that in the event of your death or disability, insurance can cover you and the income you lost due to you being indisposed.
Explore “tenancy by the entirety”
Check if your state allows the provision that states that if one spouse is sued, the lawsuit cannot attach or bifurcate the property. One of the best benefits of this defensive strategy is that it is statutorily based, which means you don’t have to pay a big amount to maintain or implement the designation. As long as your personal asset or property is titled properly, this is one of the best ways you can guard your home—as long as your state has this provision.
There are plenty of safeguards you can put in place before you start your business. The goal of asset and property protection is to insulate them from creditors, and the only way you can do this successfully is if you arm yourself with the right information and take actionable steps to shield your assets. Consider consulting with a lawyer before you make big decisions as you protect your assets and property.