While asset protection is a must for every business, it can be very confusing for new business owners. My Business debunks five common asset protection myths and sets the record straight.
Asset protection allows business owners to protect themselves and their business from any kind of risk that may appear throughout the course of the business’ operations. As it is an important aspect of risk management, business owners are encouraged to develop asset protection strategies tailor-made to the needs of their business.
Because of the misconceptions surrounding asset protection and planning, failing to know the truth behind these myths could lead to irreversible repercussions in the long run.
Some of the top myths on asset protection strategies for business owners and the truth behind them are:
Myth #1: I can’t do asset protection because I’m not rich and/or my business isn’t really that big.
Truth: Asset protection is a safe and reliable move even for small businesses and low-net worth individuals.
Regardless of how much a person’s net worth is or how large their business is, asset protection is always a great way to hedge risk and ensure the business’ survival well into the future.
Since a lot of high-net worth individuals are known to resort to asset protection, eventually it became a misconception that only rich people are allowed to engage in asset protection strategies.
Even individuals are advised to go into asset protection. Does a corporation protect your personal assets? The answer is not always yes, further highlighting the importance of asset protection. Moreover, when it comes to lawsuits, individuals and businesses with a lower net worth may find asset protection useful compared to those with a higher net worth.
Myth #2: I can’t go into asset protection since it’s an illegal business measure.
Truth: Asset protection is a powerful legal tool that offers protection from predators.
Since the concept of asset protection is mostly uncharted territory for a lot of business owners, unsurprisingly some individuals think that asset protection is mostly illegal.
But asset protection is actually a legal and government-verified process that could actually save businesses from litigation judgements, provided that the process is implemented by an experienced attorney.
As long as businesses and individuals have no intention of entering into any defrauding practice, there’s nothing wrong with protecting personal and business assets and putting them out of reach from possible predators who may be out to do the business harm.
In fact, asset protection has become such a necessity for businesses that the Australian government has adopted asset protection laws that further ensure the welfare of businesses and individuals under asset protection.
Myth #3: Asset protection is expensive.
Truth: Asset protection is generally inexpensive and a worthy investment.
Since asset protection is mostly done by large businesses and rich individuals, it’s easy to assume that this is an expensive venture accessible only to more affluent members of society. But in the long run, asset protection is actually a lot less expensive than shelling out large sums of money to pay for a lawsuit in the future.
This sum doesn’t even include the legal fees for hiring an attorney to defend the business’ lawsuit in court, even if successful.
A wise business owner knows the importance of protecting assets against possible risks. While asset protection might mean spending regularly for asset protection upkeep, the benefits of having your and the business’ assets protected from future risks definitely outweigh any disadvantage.
Myth #4: I can curb the effects of a current lawsuit against me by setting up an asset protection now.
Truth: Asset protection is a measure best implemented before a threat of a lawsuit.
If a business or an individual plans to delve into asset protection as a means to curb the effects of a lawsuit that had already been served, by then it’s already too late to benefit even slightly from asset protection.
The best way to protect business assets in the long run is via asset protection—which makes it a preventive measure and not an immediate remedy against lawsuits.
Of course, there may be exceptions where a business or an individual can implement asset protection strategies during a lawsuit and still have satisfactory results—but this is not always the case.
The safest bet for businesses is to always see asset protection as a proactive and preventive measure and not as a band-aid solution for lawsuits. That way, businesses would be able to benefit from asset protection in the long run.
Myth #5: Asset protection is a way for my business to pay less taxes.
Truth: Asset protection is NOT intended to lessen business taxes.
The truth is that asset protection and tax planning don’t go together—in the first place, asset protection isn’t meant to lessen the business’ taxes.
Businesses and individuals should always be wary against “asset protection planners” promising to decrease the taxes of a person or a business. Claims like these point to a possible scam, costing the business larger money than a lawsuit once the scam is carried out.