Regardless of how small or big, your business is, protecting assets must be in your top mind. No wants creditors, bankruptcy, or divorce to derail what they have spent many years building.
Particularly during this time of Covid-19, most businesses have closed doors indefinitely, resulting in countless layoffs, diminished profits, and loss of income.
Fortunately, several asset protection measures can keep your properties safe in the event where people hit you with a lawsuit and when other unforeseen situations strike. Some of these measures include:
1. Make a Superannuation Contribution
You need to ensure you are one of the members of regulated superannuation funds and come up with a pattern of contributions by making non-concessional and concessional contributions.
Maximizing a concessional contribution can increase your tax benefits and reduce the risks of exposing assets to creditors.
2. Develop a Protection Trust for Assets
A trust setup refers to a financial entity you create so as to transfer asset ownership to a trustee or third party. There are different kinds of trusts, and not all get protected from liability claims.
For instance, if you are looking to preserve several assets for the sake of your kids’ future, you may opt for a private family trust.
3. Have a Liability Insurance
Having liability insurance must be your first line of defense to protect business assets. It is advisable to ensure your umbrella covers are equal to your net worth.
For instance, if you will inherit around 30 million dollar estate, you need to increase liability insurance to a similar amount. Some coverage categories you need to protect your assets include:
- Long-term care insurance
- Commercial liability insurance
- Auto insurance
- Workers compensation insurance
4. Choose the Best Business Entity
There will be many tax-planning considerations, though running your business a sole proprietorship is not the best option for protecting assets.
Like the sole proprietorship, personal assets will be exposed to potential lawsuits. Setting up the right business entity, like LLC or S Corporation, is a vital step to protect your assets and grow your business.
5. Use the Right Procedures and Contracts
If there is any fraud or loophole in your procedures, it might be simple for creditors to attack personal properties and break the corporate veil.
Using a good leasing agreement for rentals, having contacts for all projects, placing title in the company’s name, and not depending on just emails may prevent all the damages.
6. Keep Business Files Safe
You need the right system so as to keep your files safe. Today, all businesses are practically operating online – so you must have a great way to back up your files, like online storage and hard drives.
You may also want to keep a hard copy and print files in a secure location. Think of other assets you will need, like extra phones, worksites, and generators.
The whole concept of protecting assets is based on the idea of the worst-case situation. You get prepared for a disaster, and if it does happen, the outcome will not be that catastrophic.
Hence, take your time to talk to your technology, financial, and legal advisors regarding some strategies you may use to protect your business from external and internal threats.