How Can a Business Owner Protect Their Personal Assets?
As a small business owner who puts in long hours to build your enterprise, it can sometimes feel like there is no separation between your personal and professional lives. You are probably willing to make this sacrifice to build a company that reflects your values and vision. But without a comprehensive asset protection strategy, everything you worked so hard to build could be lost if you are forced to pay money due to a claim or lawsuit against your business.
The best time to put asset protection strategies into place is before the need for asset protection arises. You can implement some of these strategies at your business’ inception. Other measures need to be consistently followed to maximally protect your personal assets.
Choice of Business Entity
There are certain business types out there that limit your personal liability. When a creditor goes after these types of entities for payment of a debt or lawsuit judgment, typically only business assets may be pursued. This is not true for other business entities. The owners of these business types can be held personally liable if the business owes money. If you’re not sure which entity is right for you and your business, set up an appointment to talk with us about it!
Maintaining Business Protocols
Choosing the right business entity is an important first step, but if certain protocols are not followed, a business entity could lose its liability protection, exposing the assets of its individual owners to claims made against the business.
“Piercing the Corporate Veil” is a very important concept for small businesses. Depositing a check in the wrong place or using the wrong card might seem like a small accident and a regular part of operating a business, but it can have very serious consequences that you aren’t prepared for.
Similarly, partners in a limited partnership are generally not permitted to play an active role in managing the day-to-day affairs of the business. If they do, a court may treat the partnership as a general partnership, resulting in the loss of its limited liability protection.
Something that all businesses can do to maintain personal asset protection is to keep company affairs separate from their personal affairs. This includes having separate personal and business bank accounts and never commingling the two, titling all business properties in the business’s name, and using the company name on business contracts and correspondence. In short, follow the law to the letter and draw a clear line between your personal and business finances to preserve your liability protection.
Estate Planning
A trust established for the express purpose of asset protection is another possibility. Here at McClenaghan Law Group, we work with clients daily to prepare estate planning documents that reflect their wishes and help them avoid probate. However, estate planning isn’t just to make sure that your home, heirlooms, and hard earned money goes where you want – it’s also to help you run and protect your businesses! There are laws that govern how much a trustee can be involved in a business, but by carefully constructing an estate plan that considers your business goals, you can make a comprehensive protection plan that covers everything you care about/
Do not wait to put asset protection measures in place to avoid devastating losses. Choosing a business entity that walls off your personal assets, maintaining formalities and separation between your business and personal affairs, purchasing insurance, taking advantage of exemptions, and creating trusts are a few of the asset protection strategies we recommend to our clients. Here at McClenaghan Law Group, our attorneys can help you explore these and other strategies and assist you with implementing an asset protection plan that best fits your personal and professional needs.
If any of these topics interest you, please give us a call to set up an appointment! You can reach us by telephone ta 614-429-1053 or by emailing courtney@lawdublin.com