If you own or operate a business, one constant concern is insulating your personal and family assets from claims and liabilities that may arise from your business. While it is not always possible to create a complete barrier to keep business creditors from seizing your personal or family assets, there are several steps you can take to substantially reduce that risk:
- Incorporate your business. Create an approved entity for the operation of your business so that it becomes liable for any business claims or liabilities and not you or your personal and family assets.
- Maintain the corporate entity. Operate your business to maintain the protection of the corporate entity with notice to all parties.
- Avoid personal guarantees. Buy goods or services and obtain credit in the name of your corporate entity only, always signing as a designated corporate officer, like “president.”
- Obtain insurance. Purchase insurance to address potential corporate liabilities and losses, and be sure others you do business with are insured.
- Use separate books. Operate your business as a separate entity for accounting, tax and bookkeeping purposes, rather than comingling with personal finances.
- Provide adequate funding. Be sure that your corporation is adequately funded to operate as intended without being dependent on your personal or family assets.
- Remove excess cash. Do not leave excess or unnecessary funds in your corporation that you can protect in your personal estate, even if you need to loan cash back to your business, and always document and collateralize loans.
There are many other steps a small business owner can take to protect his personal assets from claims of business creditors, including proper management and ownership of personal and family assets.
Brooks, Tarulis & Tibble, LLC assists numerous business owners in the establishment of their businesses and the protection of their personal and family assets from business creditors. If we can assist you in this regard, please contact me.