Many business owners have misconceptions regarding the law concerning the relationship between the proprietorship and the owner. Because of that, they usually go for expensive plans for the protection of their assets. These plans don’t usually work out in the end. Some people avoid these plans hoping that their venture won’t face any lawsuit or accident.
Below is a guide on a few ways to ensure that, if something goes wrong with your business, your assets are safe from the horrors of being seized or confiscated.
The Entity of Your Business
Many businesspersons set up a sole proprietorship when starting with their business. However, this option is not the safest one when we are talking about protecting personal assets. This is because, being a sole proprietorship, the owner and the business are considered the same entity, and both kinds of assets (work-related and personal) come under the same category, exposing your wealth to the threat of a lawsuit. In that case, your firm cannot pay off its liabilities on its own, and you’ll have to pay for them yourself out of your pocket.
To set up the business as an entity separate from the owner, it must be registered as a limited liability company or a corporation. You can even go for two-layer protection, such as having the assets under an LLC and operations under a corporation’s name. Such a mixture of multiple entities makes it difficult for any lawsuit to affect you personally.
Segregate Work and Personal Finances
You may think that only setting up your business as a separate entity will not adequately protect your wealth. You can start this by separating financial documents, operating the company with checkbooks, and other documents issued in the company’s name. All property and assets registered in the name of your company will strengthen the protection.
You need to make sure that you follow all regulations that corporations and limited liability companies are required to follow, paying the proper fees, and maintaining all documents as demanded by the regulations. If all documentation is properly insured, the business will be saved from many hassles in recreating documents for a lawsuit. It will also save you, as an owner, from being personally liable for what may have caused the lawsuit.
Take all Possible Precautions to Prevent Lawsuits
This won’t only keep lawsuits away from you but also help a lot if you ever face one. This also means that you can’t sit back and relax if you’ve registered your business as a separate entity and have ensured your assets’ protection by separating them from the business entirely. You still need to take measures, such as putting up signs where there are safety hazards and ensuring that your product’s quality isn’t questionable and doesn’t violate any set standards required by the law. If you operate with negligence, the lawsuit can attack your assets.
Asset Protection vs. Insurance
There are multiple “asset protection” companies that advise methods to avoid insurance by hiding your wealth. It would be best if you didn’t fall into such schemes because your business needs to have proper insurance. They help take the bullet shot by creditors and suing individuals and usually handle incidents in which the safety of assets (business or personal) is under threat.
However, it is integral that you get the correct policy, which varies with every specification. You can even have separate insurance companies to protect your business’s entity and assets. You can get a review of your company from the insurance agent to know what the right policies for your business might be. It might not sound very clear at first, but once you get to know the basics, you’ll be able to streamline your insurance policy to suit every need of your business.
If you want to protect your assets from the workplace’s liabilities, you can start by applying what is mentioned in this guide. It is recommended that you consult a licensed attorney with relevant experience. Once you’re done following the outlined steps, your wealth’s risk will be minimal, and you can operate your business with peace of mind.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.