Protecting Your Assets As An Entrepreneur

The very definition of an entrepreneur is someone who takes risks. Natural innovators see opportunities where others do not and invest large amounts of time and money in making ideas a reality. While your dedication and hard work can reap huge rewards, protecting your assets as an entrepreneur against liability and losses is a top priority.  At Johnson Law Group, we are dedicated to helping clients preserve what they work hard for to achieve. This includes recommending proven asset protection strategies for entrepreneurs. To find out more about avoiding liability and preventing losses, consider contacting an experienced estate planning and asset protection attorney at Johnson Law Group at (720) 463-4333 or Text-to-Chat (720) 730-4558 today.

Five Strategies for Protecting Your Assets As An Entrepreneur

The following details five strategies for protecting your assets as an entrepreneur. While you should consider obtaining the advice and help of an experienced legal professional, all of the following options could potentially help an entrepreneur avoid business liability and losses.

1. Choose the Right Business Structure

One of the first steps to take in protecting your assets as an entrepreneur is to choose the right structure for your business. Options includes:

• Sole proprietorship: One of the most common business entities, a sole proprietorship is best suited for one person who owns and operates a business and wants complete control. While it offers the ease of claiming business income and expenses on your personal tax return, it also leaves you solely liable for any losses.
• Partnerships: In a general partnership, each party shares equally in profits, losses, and liability. A limited liability partnership offers greater control and responsibility to one of the partners while the other takes a less active role and assumes lesser risks. Both generally are taxed through personal returns.
• Corporation: A corporation is a legal entity of its own, separate from the business owners. As a result, it reduces personal liability. A C corporation (or C Corp) is double-taxed, once as a business entity and then again through the personal income taxes of shareholders. An S corporation (S Corp) avoids double taxation, as profits and losses are passed directly through it to each shareholder.
• Limited liability company (LLC): This business structure combines elements of the other three structures, allows taxes to be passed through to personal returns, and-as the name implies-offers individual protections against liability.

The Internal Revenue Service (IRS) advises that entrepreneurs should carefully consider both the legal and tax ramifications before selecting a business structure. For this reason, visiting with an experienced estate planning and asset protection attorney can be an appropriate option for protecting your assets as an entrepreneur.

2. Be Diligent in Record Keeping

A keen eye for details when it comes to recordkeeping is one of the most underrated skills when it comes to protecting your assets as an entrepreneur.  Entrepreneur advises that keeping all personal and business transactions plays a key role in this process. This includes:

• Maintaining separate bank accounts for personal and business expenses;
• Having designated letterhead, email addresses, and electronic signatures used strictly for business correspondence;
• Carefully titling and documenting property purchased for your business;
• Hiring bookkeepers, accountants, and other professionals to supplement your own recordkeeping and ensure the proper procedures are followed.

3. Make Use of Legal Contracts

At Johnson Law Group, our legal team strongly encourages entrepreneurial clients to make use of legal contracts as a means of protection in all their transactions. This includes:

• Trademark licensing agreements, to protect the name of your business, product, logos, and slogans;
• Nondisclosure agreements, to protect your ideas and processes;
• Partnership and contractor agreements, to protect yourself when working with others
• Indemnity agreement, to protect yourself in various transactions;
• Employment contracts, to protect your interests with people you employ;
• Lease agreements, to protect yourself when renting property or equipment;
• Ensuring that all estate planning documents appropriately address any and all business and financial investments.

Contracts should clearly define terms of legal agreements, including the names of all parties involved, their individual rights and obligations, when the contract begins and ends, the consequences of terminating the contract, and how any potential disputes will be resolved.

4. Invest in Insurance

A 2019 Forbes report talked about how important barriers are in protecting your assets as an entrepreneur. The right business structure, sound recordkeeping practices, and legal contracts are all examples of barriers that help reduce liability. Equally important are buffers, which help you avoid major losses if a worst-case scenario does happen.

Insurance provides a barrier against unexpected events and can be a smart investment for entrepreneurs. Among the various types of policies you may want to consider putting in place include:

• Permanent life insurance policies, which build cash value while offering tax-deferral benefits;
• Liability insurance, which protect you in the event you are sued;
• Property insurance, to protect commercial property, inventory, and other business assets;
• Health insurance, to help offset the high costs of medical care;
• Disability insurance, in the event accidents, illnesses, or chronic health conditions prevent you from working.

5. Consider Placing Assets in a Trust

Protecting your assets as an entrepreneur means eliminating any potential risks that could jeopardize your business or your profits. A trust is one of the most useful tools in shielding income, property, and other assets from creditor claims and lawsuits.

Our estate planning attorneys frequently recommend using trusts as a means for clients to avoid probate and provide for loved ones in the event of their passing. As the name implies, you can revoke (change) this type of trust at any time and are still considered the owner of any funds or property it contains.

An asset protection trust differs in that it completely transfers ownership of your business or other assets to a third party, or trustee and is irrevocable. This makes it immune to creditor claims or legal judgments. It also provides important estate tax protections.

Consider Visiting with Our Estate Planning Attorneys Today

At Johnson Law Group, our experienced estate planning attorneys provide trusted legal guidance and unparalleled client service and support. To learn more about protecting your assets as an entrepreneur, considering calling a legal professional at (720) 463-4333 or through Text-to-Chat (720) 730-4558 today.