How to Protect Your Personal Assets as a Business Owner

By Sponsor Ian Hasegawa

As a small business owner, it can sometimes feel like there is no separation between your personal and professional lives. Without a comprehensive asset protection strategy, everything you worked so hard to build could be lost if you are forced to pay money due to a claim or lawsuit against your business. The best time to put asset protection strategies into place is before the need for asset protection arises. The following strategies will help maximally protect your assets.

Choice of Business Entity

Corporations, including S corps and C corps, limited liability companies (LLCs), and limited partnerships, protect their owners’ personal assets. When a creditor pursues these types of entities to pay a debt or lawsuit judgment, typically, only business assets may be pursued. This is not true for sole proprietorships and general partnerships. The owners of these business types can be held personally liable if the business owes money.?

Maintaining Business Protocols

Courts sometimes “pierce the corporate veil,” holding owners liable for claims against a corporation or LLC. Courts may permit this in various circumstances, such as when a business owner treats the company’s assets or funds as if they belong to the owner personally or when corporate formalities are not observed, such as holding regular meetings and recording the minutes.?

Similarly, partners in a limited partnership are generally not permitted to play an active role in managing the business's day-to-day affairs. If they do, a court may treat the partnership as a general partnership, resulting in the loss of its limited liability protection.?

All businesses can maintain personal asset protection by keeping company affairs separate from personal affairs. This includes having separate personal and business bank accounts and never blending the two.

Business Insurance

Your business also needs insurance as a hedge against unforeseen circumstances. Insurance policies cover almost any conceivable loss, from motor vehicle crashes and slip-and-fall accidents to professional malpractice and intellectual property infringements. You will need to balance the monthly insurance premiums' cost with the policy's liability limits.

Exemptions and Trusts

You can use statutory exemptions to protect assets from bankruptcy or lawsuit creditors in every state. You can also place your assets in a trust to protect them from creditors. One strategy is to use irrevocable trust. An irrevocable trust cannot be modified once created and places assets outside your control. If you no longer legally own or control an asset, a creditor cannot come after it.

Do not wait to put asset protection measures in place to avoid devastating losses. Our business attorneys can help you explore these and other strategies and assist you with implementing an asset protection plan that best fits your personal and professional needs. Contact us to schedule a meeting so you can…Leave a Legacy, not a Burden!