• Separate your business and personal assets by setting up separate bank accounts, credit cards, and insurance policies.
• Choose the right business structure to demonstrate that the business is separate from you financially and limit personal liability.
• Obtain a business bank account for financial transparency and easier tracking of expenses.
• Purchase business insurance to protect against claims made due to property damage, bodily injury, and other liabilities.
• Create an estate plan so your assets will be properly accounted for and protected.
As a business owner, you want to do everything in your power to protect your assets. After all, these assets represent your hard work and dedication and are the lifeblood of your business. You can take certain steps to ensure that your business is not vulnerable to lawsuits or other legal issues. Here are some of the most effective ways to protect your business assets from lawsuits.
Separate Your Business and Personal Assets
The first step in protecting your business assets is ensuring they are separate from your assets. This means setting up separate bank accounts, credit cards, and insurance policies for each. Doing this will ensure that the other won’t be affected if something happens to one of your businesses. It also helps make it easier for you to keep track of each company’s finances separately. Additionally, having separate bank accounts makes it easier to monitor where the money comes from and goes to within each of your businesses. Here’s how you can separate your business and personal assets:
Selecting the Right Business Structure
The structure of your business can make a big difference when it comes to protecting assets from lawsuits. When selecting the best business structure for your venture, consider all of the options—sole proprietorship, partnership, LLC, or corporation—so you can safeguard your property and limit potential personal liability. A properly structured entity also demonstrates that the business is separate from you financially and will help ensure that any debts or obligations incurred by the business won’t put your assets at risk.
Obtain a Business Bank Account
A separate bank account for your business helps limit the possibility of personal assets being used or seized in any legal action against the business. A business bank account also records all financial transactions, which can be essential in tax filings and other reporting. It also allows you to keep track of expenses and better manage cash flow.
Purchase Business Insurance
Another way to protect yourself and your business assets are by obtaining insurance coverage. This type of coverage will protect against any claims made against the company due to property damage, bodily injury, and other liabilities associated with running a business. Depending on the type of business you have, there are different types of insurance coverage available for your business:
General Liability Insurance
This coverage protects businesses against claims involving third-party bodily injury, property damage, and personal injury (libel or slander). It’s important to have this coverage in place to protect your business from legal issues related to these types of claims.
Business Income Insurance
This insurance will cover any lost income due to a covered claim. For example, if you need to close your business due to an event such as a fire or natural disaster, this coverage can help reimburse you for the income lost during that time. Also, this can protect you from any lawsuits due to income loss.
Product Liability Insurance
If you sell products, this type of coverage will protect you in case of a product-related injury or defect. This can cover any costs associated with defending and settling claims related to these issues. Additionally, this type of insurance can cover any medical payments, judgments, and settlements related to a product-related injury or defect.
Create an Estate Plan
Creating an estate plan is an important step in protecting your business assets. This type of plan will outline how you wish to handle the ownership and distribution of your assets when you pass away or are no longer able to manage them. It can also help protect those assets from potential creditors, lawsuits, and other legal issues that could arise due to the transfer of ownership. It’s important to consult with a lawyer specializing in estate planning when creating an estate plan to ensure that it’s properly structured and meets your needs. They will also be able to ensure the following:
- All of your assets are properly accounted for
- Your estate plan is up-to-date
- You have the correct structures in place to protect your assets
- Your plan is adequately funded
Your estate plan will also guide your heirs or successors if something happens to you.
By taking these proactive measures now, you can ensure that no matter what happens in the future to either yourself or your companies, your hard work will continue to benefit those who come after you. With proper planning and protection in place today, you can be confident that tomorrow will bring success for yourself and those whose lives you touch with your businesses.