Being an entrepreneur is no easy task. In fact, a very high percentage of new businesses end up failing. With that much risk involved, you may be wary about investing any of your own money into your business. You may fear you’ll end up losing everything and that angry creditors will come for your personal assets. While this is an understandable fear, there are strategies you can implement to help ensure that your personal assets will remain untouched even if your business fails.
Don’t Choose Sole Proprietorship
The kind of business entity you choose for your company is vital for protecting your assets. Overall, it’s best not to choose a sole proprietorship that will likely put your own personal assets at risk under most jurisdictions. Another choice such as a limited liability company will likely give you much more protection.
Separate Your Personal Assets from Your Business Assets
Another common problem often stems from an entrepreneur’s failure to properly separate his or her personal assets from business assets. If you use the same bank accounts for both your business and personal needs, you should expect that creditors will go after those accounts if you owe them money.
Get Business Insurance
Like all risky activities, the risks of entrepreneurship should be insured against. Make sure your business assets are properly insured so that your business losses don’t seep into your personal finances. It doesn’t matter what kind of business you are in.
Umbrella insurance is insurance coverage that can be designed to protect both business and personal assets. However, read the fine details. There may be certain circumstances in which your coverage will be denied such as if it’s determined you acted with negligence.
Physically Protect Your Business Assets
If you are spending your own money on your business assets, make sure it is a sound investment. For one, always take steps to protect physical assets like products, machinery, supplies and materials. You may want to look for Ute trays for sale that will help protect your tools from theft and the elements while they are in your vehicle.
Consider Having Your Spouse Control Certain Personal Assets
If your wife or husband is not a partner in your business, you should consider placing certain assets in their name to help protect them against creditors. In many cases, someone’s business debt does not transfer to their spouse. Creditors will not be able to go after that spouse’s assets to recoup their losses. Work with a lawyer to make sure you complete this process legally.
Overall, entrepreneurs need to be careful and consider to get business insurance. If you don’t take the right precautions, you could be in a world of hurt when your business fails.
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