Running your own business means constantly striving to stay on top of finances, trends, logistics, employees, and competition. While protecting assets may not be at the top of your priority list, it is critical to safeguarding your business, and your own livelihood.
From debts and other financial obligations, to unforeseen lawsuits and claims, risks are around every corner for businesses both big and small. Fortunately, there are a variety of solutions, many of which can be combined and matched to fit your unique needs when it comes to securing assets.
If you are just starting out in business, you may be operating as a sole proprietor. This works well enough in the short term, but creating a formal business structure provides greater protection over the long term. By forming a legally-recognized entity for your business, separate from you, you gain protection from personal liability if someone sues your business.
Examples of business structures that provide personal liability protection include:
Limited Liability Corporation (LLC)
LLCs are a popular choice for many business owners, as they are “pass-through” entities, and are easier to set up than many other organizational structures. Pass-through entities are businesses in which profits are recognized on owner and shareholder tax returns, meaning that more money is typically kept by individuals. LLCs also have fewer requirements than other organizations, so small business owners may find this structure most suitable.
C corporations are not pass-through entities, but they do have several tax advantages over LLCs. On the flip side, they do incur additional fees, and are subject to far more governmental regulation.
- Revocable (or living) trusts are entities that can be changed at any time. They offer little, if any, liability protection to the beneficiary, so these types of trusts are not recommended when attempting to protect personal or business assets. Revocable trusts are typically set up for individuals who cannot, or do not wish to, handle their own assets.
- Irrevocable trusts, on the other hand, are generally quite secure when protecting assets from liability. These are trusts that cannot be changed once they are signed (other than in exceptional, rare circumstances). The beneficiary is also not taxed on any income generated by assets held within an irrevocable trust.
Personal and Business Assets
InsuranceRegardless of intentions and planning, accidents can and do happen. Insuring your business may help mitigate costs associated with those unfortunate events, similar to how auto insurance can protect your finances from accidents on the road. There are many types of insurance, and your business may need to seek out multiple types of coverage. It is in your best interest to speak with an experienced PA asset protection attorney regarding your options.
Contact Reager & Adler, PC Today
Your business is unique. So are your risks, liabilities, and assets. Working with a skilled business law attorney will help you identify potential problems before they occur, leaving you free to work on building your business.