Protect Your Personal Assets
.When starting a business, sole proprietorships are the easiest and most common form of legal structure for small and home-based businesses.
But it carries with it a tremendous disadvantage – unlimited liability where you are personally liable for all business debts. This includes business loans, taxes, money owed to suppliers and landlords, and any judgments against the business as a result of a lawsuit. If you are running a sole proprietor business, your creditors can claim your personal assets–home, automobile, savings account, and investments.
To protect your personal assets, the first step is to consider forming a corporation or Limited Liability Company.
However, protecting personal assets can go beyond your legal structure. According to BusinessWeek, here are 5 others ways that you can protect your personal assets:
- Inventory everything – make a complete list of all your assets and debts
- Research exemptions and protective entities – a few of your assets (e.g. personal residence, life insurance policy, etc.) may be exempt from creditor actions because of federal or state laws.
- Avoid (or at least minimize) personal guarantees where you pledge to be personally responsible for a debt.
- Be wary of the contracts you sign – seek out the help of a lawyer to help make sure that the contract provides liability protection.
- Buy insurance – such as liability insurance, property insurance, even an umbrella policy to cover exposure that goes beyond property insurance
Related posts:
- Buy the Right Business Insurance
- Protect Your Business Name
- Choose the Legal Structure of Your Business
- How to Protect Your Product or Idea
- Aim to Achieve Balance Between Work and Personal Life
Category: Legal Requirements, Starting a Business
About the Author (Author Profile)
Isabel Isidro is the Managing Editor and Co-Founder of PowerHomeBiz.com. Her goal is to help small businesses do big business. Visit her at PowerHomeBiz.com Small and Home Business Blog, Women Home Business, and Learning from Big BoysSubscribe
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- Tips On How To Open A Day Care Service | December 24, 2010
This is such a great resource that you are providing and you give it away for free. I enjoy seeing websites that understand the value of providing a prime resource for free. I truly loved reading your post. Thanks!
Having read this material, I have learned for myself a lot of the new. Thanks
I think this is something that is often overlooked by many small business owners. Thanks for bringing it up. Definitely a good thing to consider