Asset protection planning is intended to reduce or eliminate the risks of being in business by shielding your business and personal assets from litigants, creditors, and other potential threats to the fullest extent legally possible. It’s crucial to have asset protection strategies in place from the moment you open your doors, because once a claim or lawsuit is filed, it’s too late. Once a claim or lawsuit is filed, if you try to protect your assets, you could be at risk of being charged with fraud. So take action now, while there is nothing to worry about and many ways to protect your assets.
While the specific protections you need will depend on the particulars of your business and your personal assets, the following four strategies form the foundation of any comprehensive asset-protection plan.
1. Limit liability with business entities
One of the most fundamental asset-protection strategies is setting up the proper entity structure for your business. Without the correct entity in place, your personal assets would be at risk if your business ever falls into debt or is hit with a lawsuit.
By structuring your business as a limited liability company (LLC) or Corporation, you can shield your personal assets from liabilities incurred by your business. Such structures establish your company as a separate legal entity that’s distinct from you as an individual, which prevents you from being personally liable for the company’s debts or legal liabilities.
As long as you properly maintain the separation of your corporate and personal assets, both LLCs and Corporations effectively create a barrier between you and the activities of your business. In that case, creditors, clients, and other potentially litigious entities can go after your business assets, but not your personal assets. You can be held personally liable in certain situations, such as if your entity isn’t maintained properly or you mistakenly commingle your personal and business finances.
Contact us to find out what entity structure is best suited for your business and how we can ensure you have as much personal protection as possible.
2. Invest in insurance
An entity won’t protect your business assets—that’s where business insurance comes in. Since a single catastrophic event or lawsuit can wipe out your company, it’s vital that you have the proper insurance coverage in place from the moment you open your doors.
The type and amount of coverage your company needs will largely depend on your particular company and its assets. Most businesses can benefit from the following forms of insurance: general liability insurance, professional liability insurance, property insurance, and employment practices insurance. Additionally, you should also consider investing in umbrella insurance, which would cover you for any damages in excess of your other individual policies.
Meet with us before you sit down with an insurance agent. We’ll evaluate your business assets and underlying risks to identify the optimal levels of coverage you should have in place.
Next week, we’ll continue with part two in this series on essential asset protection strategies for entrepreneurs.
AB Law, PLLC is a full-service business law and estate planning firm that serves clients throughout Texas. All consultations are free and no question is too silly, ridiculous, or complex. https://calendly.com/ablawpllc www.ab-firm.com