As a business owner, one of the most important things you should keep in mind is to protect your business assets to its full extent. You surely would not want to lose money in the process, which is why you should make sure that every asset is protected.
Here, we will discuss what you should consider when it comes to income tax planning and asset protection for your business.
Business Entity Matters
Businesses that have sole proprietors are often not fully protected when it comes to their assets. When you are a sole proprietor, this means your assets are completely exposed to potential lawsuits. When getting or putting up a business, make sure to choose an S Corporation or Limited Liability Company (LLC) as your business entity. This will secure your business assets and won’t expose you to lawsuits.
Take Note of the Procedures and Contracts
Make sure to get good lease agreements for your rentals, place equipment and property titles in the company name, create proper contracts in every project, and have subcontractor agreements. You should also never hire people under the table, and you should not just rely on e-mails when it comes to important matters and relationships.
Everything should be written in a contract and is signed by both parties. Acting fraudulently and negligently can make creditors attack you and your personal assets, so make sure to put everything in writing to avoid these types of problems.
Get a Business Insurance
One important thing you should do is to get your business insured. Include this in your startup budget, so you do not have to worry about it later on. Talk to an agent and ask them what would be the best type of insurance for your business. Insurances for rental properties are different compared to professional practice and retail stores, so make sure you are getting the right one.
Purchase Umbrella Insurance
Aside from business insurance, you might want to get umbrella insurance to protect your assets. This will serve as an additional layer of protection for your insurances. This type of insurance may cost you around $300 to $500 annually, but it definitely is well worth it.
You should remember, though, that umbrella insurances won’t cover you from criminal, fraudulent, negligent, or reckless actions.
The Corporate Veil
If you have obtained a corporate veil, then you would want to make sure that you will keep it maintained all throughout your business’ duration. Maintain a separate checkbook and bank account for your business and do not mix it up with your personal assets. Make sure to use your company’s name on all the documents needed and maintain corporate records and log minutes of each and every meeting held.
Be careful and talk to a lawyer when it comes to protecting your assets. It would be wiser for you to splurge a bit than lose most or all of your assets. Follow these tips and you’d never have to worry about your business assets ever again!