How To Effectively Protect Your Business Assets

As a business owner, you’re certainly aware that running and maintaining a company comes with its share of problems and hazards. Although you may have the goal of making a profit, there are still numerous responsibilities you have to fulfill. An important one is that of securing your assets. The truth is, your business is exposed to various risks such as debts, claims for damages caused by your employees, mortgage obligations to third parties and vendors, and consumer protection difficulties. If not managed appropriately, these risks can result in the loss of both commercial and personal assets. So, how can you adequately protect your assets? Here are a few tips you should. 

  1. Select the appropriate structure for your company

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The type of business structure you adopt for your business affects how much protection you would give your assets. In many cases, operating a sole proprietorship is not a good option for asset protection. As a sole proprietor, your personal assets are completely vulnerable to a potential lawsuit. Creating a corporate entity, such as a corporation or a limited liability company (LLC), is an essential step in expanding your company and safeguarding your assets.

  1. Use the right processes

Creditors can easily break the business veil and attack your personal assets when you act recklessly or fraudulently. Having good lease agreements for your rentals, putting property and equipment titles in the company name, having subcontractor agreements and contracts on every project, not relying on emails for critical conditions, and never hiring people under the table will all help prevent this. 

You should also ensure that your business goes into transactions from individuals and parties that are licensed, bonded, and insured. For example, if your company needs industrial-sized water tanks, it is better to use Slimline Tanks from National Poly, a licensed company. Doing this would help prevent your business from spending money on unreliable goods and services and keep your business assets safe from creditor probing.

You should also consult asset protection professionals, legal and tax advisors for advice on the right processes and business practices you can adopt to ensure your business’s assets are protected. 

  1. Keep your corporate cloak on

If you’ve formed an entity, don’t expect to be able to avoid a lawsuit by just holding the entity’s articles of incorporation in your drawer. Retain a separate bank account and checkbook for your business, use the company name on all documents, title property in the company’s name if necessary, and, most importantly, maintain corporate records and log minutes at your annual meeting. LLCs aren’t exempt from performing annual maintenance, either.

  1. Separate your personal and business assets

You could be in danger if you don’t separate your personal assets from those of your company. Your personal assets are not protected from your business if you run it as a sole proprietorship or a general partnership. It’s also a problem if you don’t have separate bank accounts.

  1. Obtain the necessary business insurances

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Insurance is a vital part of your company that should be considered to protect your assets. Accidents, legal claims, and other circumstances could put your business in a position that puts your assets in harm’s way. By obtaining insurance, you can deal with these issues without worrying about losing your assets.

However, the effectiveness of insurance protection over your assets would depend on the time of coverage you get. Suppose you’re a corporate director. In that case, make sure you’re covered by a directors and officers (D&O) policy and that you’ve signed an indemnity document (also known as an officer protection deed) with the appropriate firms. You should also get and have a professional indemnity insurance policy for the duration of your business and for seven years after you leave it. If your company has a policy, go over it thoroughly. Pay close attention to any exclusions or special requirements. You might also want to think about getting “umbrella liability insurance,” which acts as an “umbrella” over whatever other insurance you have.

  1. Keep a record of various transactions and paperwork

In the event of a dispute or lawsuit, records are helpful. Emails and critical documents like contracts, invoices, and payment records should all be saved. Follow verbal conversations with written (or emailed) confirmation to make it easier to keep a record. Remember to make backups in case your physical copies or computer are destroyed. In addition to securing digital copies, it is advisable to use cloud solutions to back up to store these documents digitally and safely.

  1. Identify liability risk areas

The first step in managing your company’s risks is to identify them. Anything that could injure an employee or your firm and lead to a lawsuit should be considered. Suits are commonly bought for various reasons, including bodily harm, property damage, and financial loss. Prioritizing the most likely or disruptive hazards is vital when identifying areas of risk. Still, it’s also necessary to examine all you can to prepare and mitigate the impact.

  1. Develop liability risk reduction process

Another way to protect your assets is by creating risk-reduction procedures. The purpose of such a strategy is to reduce the chances of putting your assets at risk by implementing measures to prevent being liable for certain issues. You can do this by ensuring the workplace is safe at all times. Or, if you own a manufacturing company, you can protect your business assets by preventing injury. The strategies you implement would depend on your industry, commercial operations, and the expected or likely risks various parties may be exposed to.

  1. Engage the services of a competent attorney

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When launching a business, consult attorneys to ensure you have legal representation on hand. If you’ve been sued, you may need legal advice before taking action—or to recommend what measures to take if you’ve been sued. It’s a favorable impression to engage an adviser that knows the local laws and customs in the area where your business operates and, if necessary, has experience in a particular industry. There are several services available to assist you in finding a reputable lawyer. You can seek professional references from other business owners or consult professional organizations to which the company belongs (such as the local chamber of commerce or any sector association). Of course, you can always use the phone directory to make cold calls (and conduct interviews).

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About Dequiana Jackson

Dequiana Jackson, Founder of Inspired Marketing, Inc., helps overachieving women entrepreneurs conquer limiting beliefs and create marketing plans that grow their businesses. This includes one-on-one marketing plan development, digital product creation, web design and content marketing. Dequiana is the author of Know Your Business: How to Attract Ideal Clients & Sell More and runs the award-winning blog, Entrepreneur-Resources.net.

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One comment

  1. All great tips to consider when it comes to protecting one’s business assets. Whether it’s software or antivirus capabilities or what have you, there’s no such thing as being too careful.

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