Did you know you can lose some or all of the assets you worked so hard to acquire?
As an individual, nobody is likely to come after your assets, unless you default on a secured loan. As a business owner, though, there are several reasons you could lose your assets. If you evade business taxes, for example, the IRS could seize your assets.
This is where asset protection comes into play.
In this article, we are answering the question “what is asset protection” and sharing a couple of strategies you can use to ensure your assets remain yours.
What Is Asset Protection?
Asset protection is just that; securing your valuables from any individual or organization that might want to lay claim on them.
If you’re new to the world of asset management, you’re probably wondering why anyone would want to come after an asset that legitimately belongs to you. Well, in a perfect world, we wouldn’t worry about protecting our assets. But this world is anything but perfect, so there’s a good chance you could your assets, especially if you get into business.
Here’s a simple illustration of how you could lose one of your assets.
You start a business. In the process, you purchase an office space, from where you operate. In the course of doing business, some of your employees sustain severe injuries.
If you didn’t have adequate worker’s compensation insurance, it’s possible that the employees can sue for more compensation. Knowing that you own the building, they can ask the court to order you to sell it so you can offset what you owe them. And just like that, you would have lost your asset.
Asset Protection Strategies
Now that you know how you could lose your assets, let’s focus on the steps you can take to protect them.
Register Your Business as an LLC
A common asset protection mistake most first-time entrepreneurs make is registering their businesses as sole proprietorships.
It’s understandable that this structure is easy to set up and that you might have no assets to protect when you’re starting out, but sole proprietorships offer you no liability protection at all. You and your business are inseparable. What belongs to you also belongs to the business.
Creating a limited liability company is a more robust way to protect your assets. In an LLC, your personal assets, like a house and a car, are protected. Creditors can go after the company’s bank balance and other assets, but they can’t touch your personal ones.
Limited partnerships and S and C corporations also offer adequate asset protection.
Purchase Adequate General Liability Insurance
Creditors and other parties will only come after your assets when your business is unable to pay what it owes in cash. Purchasing adequate general liability insurance can offer good financial protection against several risks your business faces.
Consult with an Asset Protection Specialist
At the end of the day, you’re not an asset protection specialist. You’re an entrepreneur trying to grow a business. It’s wise to hire a company that offers asset protection services and let it devise a strategy that suits you needs.
Protect Your Assets, Protect Your Business
So, what is asset protection? To recap, it’s the measures an individual or business takes to protect assets from creditors and other parties. There are a couple of strategies you can use, depending on what suits your situation.
Keep reading our blog more informative articles.