One of the most challenging aspects of owning a business is understanding how to manage your personal assets. Many small business owners get taken advantage of with high-priced asset protection plans, expensive insurance or a lawsuit due to an accident that isn’t their fault. Below are four ways to safeguard your personal wealth from the threat of business liabilities:
Choose the right entity for your business. When starting out, a sole proprietorship may seem like the best option. However, it’s not the best choice if you’re concerned about protecting your personal wealth from business liabilities. To better protect yourself in the event of a lawsuit, set up your business as a corporation or limited liability company.
Keep work and personal finances separate. It’s important that you keep a separate checkbook for your business, use the company name on all documents and maintain a corporate book with your annual minutes.
Have proof that you’re a stand-up business owner. To avoid attacks on your personal assets, you need to prove that you did everything in your power to prevent the negative situation from happening. Acting negligently and fraudulently is the easiest way for creditors to attack your personal wealth.
Purchase the proper insurance. Different types of businesses need different types of insurance. Make sure to do an annual review with an insurance agent to ensure your policies are relevant and provide the best coverage.
For more information on how to protect your personal assets from business risks, please visit Entrepreneur.