It’s easy to throw caution to the wind and rush into the entrepreneurial role. Unfortunately, this can result in more harm than good.
There are several factors to consider before launching your brand, including asset protection. Not only is this important to avoiding unnecessary lawsuits or extraneous legal fees, it safeguards your intellectual property from others who want to piggyback off from your success.
1. Structure Your Business Thoughtfully
The first step in protecting your assets is to structure and classify your business correctly. While sole proprietorships are common, especially with millennials who want to see fast results, it often isn’t your best choice. Sole proprietors don’t have much protection over their assets at all.
Instead, consider structuring your business as a limited liability company or S corporation. Not only is this helpful in scenarios that involve multiple business owners or partners, but it’s also a great option for individuals trying to minimize their entrepreneurial risks.
2. Standardize Your Documentation
When it comes time for record keeping, verification, and maintenance, the use of standardized documentation can make your life much easier. Instead of sorting through handwritten ledgers, hastily typed invoices and custom receipts, spend some time creating templates for such documents.
Not only will it save you time when it comes to filling out these records in the first place, it can spare you a lot of headaches when it comes to verifying or double-checking records at a later date.
This is also a great way to establish your entrepreneurial brand while pushing some semblance of continuity from customer to customer and even between different projects.
If you need assistance with legal documentation, contact a qualified legal professional to help you sort through the jargon and ensure you’re using the proper wording. It’s always better to be safe than sorry.
3. Increase Cyber Security
Although the increased prevalence of the Internet and mobile communications has been a boon thus far in the 21st century, it’s not without its risks. Cybercrime is on the rise, and it comes in many different forms: identity theft, ransomware, and viruses are just some of the most common threats.
If left completely unchecked, the cumulative cost of cybercrime is expected to reach $2 trillion in just a few short years. There are some steps you can take to increase the security of your own computer systems and servers. Maintaining an active firewall and antivirus subscription are important, but they’re not enough.
Installing the latest operating system updates, monitoring your network activity and unplugging from the grid during extended downtimes or vacations can decrease your exposure to cybercrime and better protect your assets.
4. Separate Your Finances
Separating your personal finances from that of your business is important for any entrepreneur who wants to protect their assets. All the structuring and classification in the world isn’t going to do any good if you’re using one account to cover both your personal and professional needs.
In this case, using separate accounts is good for more than just recordkeeping purposes. It really could help protect your assets in the event of a lawsuit.
5. Obtain the Proper Insurance
Insurance can be a lifesaver for entrepreneurs. It doesn’t really matter if you’re using personal or business insurance. Make sure your liability coverage is, at the very least, equal to your total net worth. Some entrepreneurs are under the false impression that asset protection planning is a substitute for insurance, but this simply isn’t true.
Remember, an asset protection plan isn’t going to foot the bill for any lawsuits or provide you with any sort of legal defense in the event of a claim. Only an experienced lawyer can do that, so it pays to have both.
6. Join an Asset Protection Trust
Offshore trust accounts have long been used to provide greater asset protection for entrepreneurs and professionals alike. While this can be done legally, these accounts are often too expensive to be of substantial benefit.
For an alternative, many states are now forming their own asset protection trusts. Not only does this protect your assets from the majority of your creditors, but these accounts can be used as long-term savings accounts for your children.
The availability of domestic asset protection trust programs varies by location. Michigan is the most recent state to establish such a program and the 17th thus far. They join the likes of Alaska, Delaware, Nevada, Rhode Island, South Dakota and others.
Protecting Your Current Assets While Amassing New Ones
As an entrepreneur, it’s your job to protect your current assets while amassing new ones. Apart from measuring your forward progress in the role, this strategy is critical to ensuring the longevity of your brand and the financial stability of your future.
Note: By no means is this legal advice. Before structuring a company, it is best to consult with an attorney if you deem it necessary.