Ensuring you have a sound and effective asset protection system in place is one of your responsibilities as a business owner. Here's how to plan ahead to reduce, if not eliminate, the risk of exposing your assets to lawsuits and other threats.
As a business owner, you need to plan ahead and prepare for future challenges and threats that may have a devastating effect on both your personal and business assets. Keep in mind that asset protection planning should be done long before threats become imminent.
Here’s a list of things to do:
- Understand contract liabilities
- Establish multiple structures
- Expertly navigate the system
- Select best insurance policies
- Employ dedicated asset protection tools
Understand contract liabilities
Most of the time, it still remains a challenge for any business owner to avoid unlimited personal liability for business debts even with proper planning. You need to understand that exceptions exist in contract liability.
Nevertheless, you can still avoid these exceptions. Seek legal advice from your lawyer and develop a comprehensive strategy that suits both your personal and business needs.
A sound strategy begins when you have a thorough understanding of contract liability, and with the help of your lawyer, effect this strategy to preserve legal protection and separate your personal assets from your business liabilities, thus effectively reducing, if not eliminating, your and your business’s exposure to future threats.
Establish multiple structures
By establishing a maze safeguarding your assets, and then employing multiple structures to fortify each of the walls making up this maze, you efficiently separate specific risks of being sued with your assets by determining which asset or property goes with which trust.
Put up a trust for your personal assets or properties. For your trade shares, establish a second one. A third one you put up for your business.
These separate trust systems enable you to mitigate risks and keep your assets from exposure to legal attacks, while still allowing you to maximise on the advantages and benefits of each trust.
Simply, you need to stick to the rule of conducting business strictly for business, which means avoiding intermingling your personal assets and liabilities with your business structures.
Expertly navigate the system
You can only design a “workaround” on any system if you perfectly understand and master it. The same is true when you engage in asset protection as a business owner.
A thorough understanding—then mastery—of the system will help you identify your own asset protection needs. You will then proceed by employing this “mastery” in developing a comprehensive asset protection plan that effectively safeguards your assets and properties.
You don’t need to do this alone. You may seek the advice of your lawyer, accountant, and other relevant professionals who all have the necessary expertise in one or several of the specifics in your asset protection goals.
Doing so ensures that you do not only craft a well-informed asset protection system, but also a comprehensive and effective one.
Select best insurance policies
Property insurance, liability insurance, and even an umbrella policy will help you strengthen your asset protection scheme.
Property insurance covers your business assets. Your property insurance may or may not include coverage of your inventory; if it doesn’t, select a separate policy for your stocks goods sale. Liability insurance covers damages for personal injuries and property damages.
Consider an umbrella policy for risks and threats that go beyond your property insurance coverage. If you have all these in place and working for you, then you’re sure your cash flow isn’t affected during emergencies or any other eventualities.
Employ dedicated asset protection tools
When properly structured, limited partnerships, limited liability companies (LLCs), and trusts can shield you from devastating consequences in the event you get sued.
To maximise on their benefits, incorporate your business using corporations or LLCs, and from there proceed by talking to your lawyer. You and your lawyer will then develop the strongest defence system you can in taking on the legal attacks hurled at you.
By “strongest” we mean a system that accounts for your personal and business situation—including all of your assets and liabilities—and then effectively reducing, if not terminating, all possible devastating legal repercussions.
It cannot be overemphasised that the most effective asset protection systems are designed way before any threat or danger is imminent. If you haven’t yet, start yours today.