Business people need to be careful about protecting their assets. Being a public figure can make them a target in some significant ways. Asset protection involves using legal and tax strategies to prevent creditors from accessing the things an entrepreneur owns.
One of the most important decisions an entrepreneur makes is how to set up their business. Many people start off as sole proprietors. This can be very risky. As a sole proprietor, there’s no real division between personal property and business assets. That means that personal assets are at risk should there be a lawsuit. An exception to this may be a personal residence. It may be possible to designate the main residence as tenancy by the entirety. In many states, this type of title can protect a home if one spouse who lives there is being sued.
Many companies use an LLC structure as a layer of protection. However, just filing the paperwork isn’t always enough to eliminate risk. In order to prove they function as a true LLC, business people need to separate the business from their own finances. This means getting a business checking account and being careful to use a business, not personal, name on all company contracts and other documents.
Creditors will always look for ways to get at an entrepreneur’s personal assets. They want to recover their money by any legal means necessary. One way of doing that is to exploit any chinks in the asset protection armor around a company. It’s important to always act in a proper, professional manner by using contracts, not handshake deals, on all projects. Ensure that there’s proper paperwork, not just an email trail, when making a contract with anyone. Anything less than this can be portrayed as negligence.
Any business needs to have proper insurance. The exact type of insurance will depend on the business. Physicians and lawyers need professional liability coverages. Retailers need to worry more about physical risks, like slips, trips, and falls. Insurance protects companies against risks. It also provides people who would sue a business with a new company to contact about any issues. Also, state laws can require some business lines to have proof of insurance to operate.