How to Protect Your Personal Assets as an Entrepreneur
The decision to become a small business owner is not one you should take lightly. While you may be sick of working 9-5 for your boss, running your own business is much more difficult. Instead of working 9-5, you’ll likely be working closer to 5 a.m. to 9 p.m, seven days a week. Plus, there’s a lot more risk involved.
One of the risks you’ll encounter involves your personal assets. If you’re a sole proprietor, it’s possible you could lose not only your business assets but your personal assets as well if your business doesn’t succeed. Even if you’re successful, you could face some challenges when trying to keep your personal and business assets separate. The good news is that there are some ways to reduce your risk.
Set up the Right Business Type
There are four main types of businesses: sole proprietorship, partnership, LLC and corporation. A corporation offers the most protections, but it can be difficult to set up. A sole proprietorship, on the other hand, is the easiest to set up, but in return, you get the least amount of protections. If someone sues your business, it is you personally that they are suing. The trick is to find the best business type for your needs.
Keep Assets Separate
Once you start commingling, or combining, personal and business assets, the trouble starts. You need to keep your business separate from your personal life in terms of finances. Make sure you have separate bank accounts. If you’re married, you may want to consider putting assets in your spouse’s name. Contact a lawyer to understand your options.
Get Insurance
You should ensure your business is well-insured in the event of an angry customer or other calamity that could cause your business to potentially go bankrupt. There are many types of insurance to consider. For example, by buying life insurance, you protect any business partners as well as your family if something were to happen to you.
Consider More Than One Income Stream
Many entrepreneurs put their heart and soul into their new business and don’t think about diversifying. You shouldn’t become too dependent on one source of income, especially when your business is still new. Your business will likely require a lot of money for a while, so how will you pay bills? You need to consider various sources of income, such as annuities, starting another business or investments, such as stocks, bonds or real estate.
Learn More About Sole Proprietorships
While owning your own business can be fun and exciting, there’s a lot you need to know when you begin operating as an entrepreneur. There are legal aspects involved and you want to make sure your personal assets are protected, as they can often become commingled with your business.
Orlando sole proprietorship lawyer B.F. Godfrey from Godfrey Legal can determine if a sole proprietorship is right for you. While it can be easier, it does come with some disadvantages. Fill out the online form or call (407) 890-0023 to schedule a consultation.
Resource:
smallbiztrends.com/2020/08/6-ways-small-business-owners-can-protect-personal-finances.html
https://www.godfreylegal.com/sole-proprietorships-not-a-priority-for-paycheck-protection-program/
