Every year in the United States, over half a million businesses open up.
If you’re an entrepreneur who has recently set up a business, thumbs up! However, one of the things you’ll quickly learn is you need to protect your business’s assets.
Risks are everywhere.
A severe storm can run down your business premises and damage your equipment and stock. Or an electrical fault can cause a fire that reduces your business to ashes…
You need to know how to protect your assets from such risks.
In this article, we’re telling you how to do it
Make Strategic Decisions Right From the Start
The hard work of protecting a business doesn’t start when a business is up and running. It starts before it even opens its doors.
One important aspect to consider is the location of your upcoming business.
You see, most business owners focus on finding a location that’s has a high number of potential customers and a low number of competitors. Sure, setting up a business in such a location is a smart move, but what if the area is prone to earthquakes or floods? A severe weather event can bring your business to its knees.
As such, you must consider the safety and security of a location when opening a business. If there’s an imminent threat to your assets, you can opt to find another location that’s less prone to the physical risks you’re avoiding.
Alternatively, you could set up an online business. Web-based enterprises typically aren’t vulnerable to physical risks such as adverse weather.
Choose the Right Legal Structure
There are four types of legal structures for business:
- Sole proprietorship
- Partnership
- Limited liability company
- Corporation (S & C corporations).
Every structure has an impact on your liabilities as a business owner.
As a sole proprietor, you’re fully responsible for your business’ debts and other liabilities. If someone sustains injuries while on your premises, they have a right to sue you for compensation. If you’re unable to pay a business loan, your creditors can come after your personal assets.
Unlike a sole proprietorship, a partnership can offer some liability protection. If you choose to become a limited partner in any business partnership, your liability for the business debts cannot exceed the value of your investment.
A limited liability company, like a limited partnership, protects you from the company’s debts when its liabilities exceed the capital you invested.
Corporations offer the best liability protection. Under the law, a corporation is an entity that’s fully responsible for its debts.
While some of these legal structures can protect your personal assets, they can also protect a business’s assets. If you register your business as an LLC, for example, it’s easier to file for bankruptcy protection when someone is after its assets.
Also, setting up an LLC is ideal especially when real estate asset protection is your primary goal.
Purchase Adequate Insurance Coverage
In business, some risks are simply unavoidable.
Weather catastrophes, for instance, can happen anywhere, regardless of whether a certain area is known to be prone. Or burglars can break into your business and steal valuables, regardless of the security measures you had put in place.
This is where business insurance comes in.
Although there is general liability insurance, there are different types of business insurance policies you can purchase to cover specific areas in your business.
There’s worker’s compensation insurance to pay for your employees’ healthcare expenses and loss of income when they get injured on the job. There’s product liability insurance to protect your business from claims arising from injuries caused by product malfunctions.
Other types of business insurance coverage include:
- Property insurance
- Vehicular insurance
- Business interruption insurance
- Cyber insurance
- Professional liability insurance.
Business insurance costs money. The more coverage you need, the more money you need to pay. If you’re anything like most small business owners, you might be tempted to forgo purchasing insurance, unless it’s mandatory.
Don’t make this mistake.
When you want to protect your business, then the cost of insurance is worth it. A single lawsuit, for instance, can drive your business into bankruptcy.
Enter Into Proper Contracts
In the course of business, you’ll enter into contracts with various parties.
These contracts can expose you to risk and leave your assets vulnerable. For example, when you into a financing agreement with a lender, your real estate assets could be on the line in the event that your business defaults on the loan.
Entering into a proper contract can be all you need to protect your assets, even if you’re unable to service the loan. If you can manage to agree in writing that your physical assets cannot be claimed under any circumstances, then your lender will have no right to come after them. If they do, you can sue them in a court of law and win.
Keep an Eye on Employee Fraud
Sometimes it’s rogue employees who’re the biggest threat to your business and its assets.
As an employer, it’s your responsibility to curb employee fraud. Developing effective protocol policies and installing security and surveillance systems at your premises will go a long way in preventing internal theft.
Don’t Mix Personal Assets With Business Assets
Small business owners, especially those running sole proprietorships, have a tendency of mixing personal assets with business assets. Doing this is like shooting your business in the arm.
In case you have some personal liabilities, like a secured personal loan, lenders can come after your business assets because you haven’t separated them from your personal assets.
How to Protect Your Assets Simplified
You’ve worked so hard to open a business and acquire valuable assets. Don’t leave them exposed to risks. With this guide on how to protect your assets, you now know how to keep what belongs to your business under lock and key.
Keep reading our blog for more small business tips and insights.
