Whether you are a new entrepreneur or a seasoned business owner, some protections are needed so that you don’t find yourself a party to lawsuits that can cause business loss. Some of those projections include hiring a CPA and attorney, doing background checks on employees, and determining the correct form of business based on what you do. Continue reading to discover other strategies for protecting your business and why each is important.
1. Separate Business and Personal Assets
The money you spend and make on your business has different tax implications and benefits. Therefore, it is necessary to keep business and personal assets separate. This strategy is also essential for personal protection purposes.
When it comes to taxes for your business, it is a lot less stressful if you have your expenses and expenditures separated with receipts. When you take your documents to your tax preparer, they will thoroughly go over your business information, which will save you a lot of time and hassle. Keeping your business and personal receipts separate will protect you if you get audited.
Also, if someone believes that you have harmed them outside of your business, say in an auto accident, they will have a more challenging time recovering assets from your company if you keep all of your assets separate.
2. Obtain Sufficient Insurance
Regardless of your business, insurance is a necessity to protect your business. Insurance is something that companies purchase as protection against financial loss.
There are several types of insurance for businesses, including general liability, commercial property insurance, and business income insurance. Although they are all important, vehicle insurance is vital if your company has commercial vehicles, including cars, vans, trucks, dump trucks, and other style vehicles. According to Milepost Insurance, getting customized coverage to protect cars that meets all your needs is as easy as answering a few questions and getting a quote in 15 minutes.
3. Guard Against Doing Business With Unscrupulous People
Whatever business you are in, there will be people who you know are unscrupulous who will request your services. While their money spends the same as ethical customers, it is not wise to do business with people who you know do business unethically or are sketchy in business.
In addition to potentially damaging your business reputation, doing business with unscrupulous people can cause your business to lose credibility, create a morale or production decline among your employees, and they can cause an unsavory spotlight to shine on your business.
4. Transfer Some Assets To A Trust
Setting up a trust for some of your business assets is a significant way to protect your business’s assets. There are many reasons to put business assets in a trust, and a significant benefit is to protect those assets from theft.
Some different types of trusts for a business include:
Grantor Retained Annuity Trust is a trust for an S corporation that will transfer business assets upon the business owner’s death. It would provide annuity payments to the beneficiary that is not subject to estate taxes.
Life Insurance Trust is a way to pass the business to a family member while avoiding estate taxes.
Charitable Trusts are designed to leave money to a charity along with family members and friends. There are two types of charitable trusts, the charitable lead trust, and the charitable remainder trust.
A business living trust is available to a viable business and relieves the family members of any business debt or burdens should the business owner die.
5. Avoid Conflicts of Interest
A conflict of interest in business occurs when a business’s interest could compromise the business’s judgment, decisions, or actions.
For instance, your brother comes to you because he is newly married to a foreigner, and your business helps foreigners obtain VISAs to work in the United States. It is not a problem if your brother seeks advice from you on the easiest way to do this. It is a problem if your brother asks you to move his new wife to the front of the line and get her a VISA immediately so that she can work in the United States.
Conflicts of interest come up in any business. Business owners must be careful to protect their businesses from conflict of interest.
Conclusion
As you have read, there are specific strategies that business owners can put into place to protect their businesses. While some of them may seem obvious, some of the strategies take some thought and will protect your business should personal issues arise. These strategies are practical, but they will also offer your company protection.
