Starting a new business can be both exciting and exhilarating because it often requires us to explore new terrains and go where we have not ventured off to before, business-wise.It can also present many threats for your existing assets since we don’t always have 100 percent insight into how the venture will pan out. Thankfully, there are some steps we can take to ensure that we can shield our personal assets from risks and losses.Here are some essential tips for shielding your assets before you launch a new business.
Set up a business entity
If you truly want to protect your assets, avoid operating as asole proprietorship.This is because when you are a sole owner, or if your business is unincorporated, you run the risk of exposing your personal assets to lawsuits in the future. Establishing a business entity is a key step to shielding your assets should things go awry.
In simple terms,this step allows you to create an entity that’s entirely separate from you as an individual. While it won’t protect you from everything and you can still be held liable for certain damages, legal issues, or business debts, establishing a business entity can still go a long way in shielding the personal assets you built up over the years before you started this business.
Use the corporate veil
It doesn’t just stop with gaining all the necessary articles of incorporation in your office. Those papers will not be enough to rescue you from a lawsuit if it comes. Make sure that in all official company transactions, you use a separate checkbook and bank account for your business, use your business’s official name on all files and documents, and that you always keep an organized record and log of everything during your meetings. Doing annual maintenance of your business is not just good for you; it’s also required by law.
Make sure everything is above board
If you truly want to shield the assets you have worked so hard for, thenbe abovereproachin all your business dealings. Avoid acting in negligent and fraudulent ways by never tolerating under-the-table practices, having reasonable lease agreements on all your business’s rentals, having good agreements with subcontractors on every project you take on, and not depending on the digital world for important business relationships. Making sure everything is above board includes only working withlicensed, insured, and bonded specialists.
Aside from your life insurance, healthcare insurance,home insurance, and car insurance, you also need toinvest in the appropriate business insurance for your new start-up. Starting a new business entails adding insurance costs to your startup budget. Business insurance will help you deal with untoward incidents you may face in yourjourneyasa businessowner. Get the appropriate insurance policy for your business’s specific needs. For example, a physical retail store might need a different kind of insurance from an online store, so make sure to study every policy and consult with your agent about the best policy for your startup.
Transfer personal assets to your spouse
If your job or business exposes you to more losses, and your spouse has a more stable one, consider moving some personal assets to your spouse’s name. The general rule of thumb is that creditors do not often have the warrant to reach the separate asset of another spouse, which means it might be strategic to move your most valuable assets to the spouse who has the least exposure to failure and risk. If you signed a prenuptial agreement, that might come in handy for this strategy. It will help you shield these assets to your creditors without having your spouse be held liable.
Take note, however, that you need to think carefully before employing this strategy.Opting for this route affects the division of assets between you and your spouse if you decide to divorce, so make sure that both of you are in it for the long haul before you take this step.
Use simple common sense
Don’t let greed get in the way of you obeying the law. If you don’t know what’s allowed and what’s not allowed by law, consider consulting with a lawyer. Hire financial and business experts that can help you find ways to increase protection for your assets, and don’t agree to anything that does not have a contract. Make sure everything is written in black and white and that you always have experts who can help double-check every contract you agree to at every stage of your business development.
Starting a business does not mean you need to risk everything you own. Follow these steps and shield your assets as you start this venture.