The focus of most first-time business owners and even established large enterprises is always about how to increase their sales and earn more revenues. Financial reports are often about how the sales have exceeded the expenses of the business. Although these are important aspects of a business; risks and downfalls are also important facets to know and prepare for. It would be best to take some time to plan how to manage the various risks that could happen to your enterprise.
One way to prepare for these pitfalls is by having asset protection. The basic idea here is to separate your business’s profitable but risky activities from personal assets and wealth. Some business owners even stash away their money in trust funds set up in the Caribbeans and Nevis Island. They believe that the benefits outweigh the offshore trust cost.
Here’s a short guide to help you protect your assets.
- Create A Risk Management Strategy
First-time business owners and startup businesses are naturally more concerned about growing their business through aggressive marketing and business development efforts. This is expected since they’re just starting up and trying to attract as many customers or clients as they can.
They may have shelled out a considerable amount of money for the initial capital outlay and startup expenses of their business. The only way to recoup their investment is to use these assets and investments to earn revenues and gain profits.
The flipside of profit that most first-time business owners don’t see is that every opportunity is fraught with risk. The more opportunities that a business encounters mean that it’s also increasing its exposure to potential risk. For example, a business might get more contracts involving higher volumes and amounts. But this also comes with the risk that the goods might be damaged during transit, or not be paid by the buyer if the buyer goes bankrupt.
It would be sound business practice for first-time business owners to consider coming up with a risk management strategy that they can refer to as their startup continues to attract more clients and grow its sales and revenues. You can consult an asset protection lawyer on the legal options that would fit your business strategy. Try to cover all aspects of business risk such as property damage, premise liability for bodily injury, unpaid accounts receivables, the bankruptcy of your other business partners, among others.
- Protection And Property Insurance
One of the first things you should consider as a first-time business owner is to protect the initial investment and capital outlay that you poured into your business. This can be the office equipment and furniture that you bought such as your computers, printers, and other IT equipment. This can also be your building or commercial office center.
You can get property insurance to protect your real property and other assets you own. Many possible risks can cause damage to your property such as fire, storms, earthquakes, flooding, and even rioting and vandalism. By getting property and fire insurance for your business assets, you can have the assurance that you’d be able to recoup some portion if not the total value of your business assets in case of damage.
- Protection Against Liability Claims
Another risk that all businesses face is the probability of liability claims for compensation and damages from all sorts of visitors, customers, or employees. For instance, anyone who gets hurt or injured within the premises of your business could hold you as a business owner liable to pay compensation.
Here are possible business scenarios that can incur liability:
- Grocery store owners can be sued by any shopper who slips, trips, or falls while inside the premises of their store.
- Pharmaceutical companies can be sued by patients who experience excessively harmful side effects after taking their medicines.
- Even online stores can be sued if they sell products that cause harm or injury to their buyers.
Business liability insurance can help protect your assets by providing insurance coverage for your business in the event you face lawsuits from customers or clients. So, if you don’t want to lose money to liability claims, it would be best to acquire this insurance.
- Transfer Wealth To Trust Funds
As a first-time business owner, you might also want to consider putting your revenues and wealth into a place where they can’t be easily reached by creditors or court orders. This could be part of your risk management strategy. The idea here is to shift as much of the capital and other funds to assets and non-risky instruments as soon as possible.
One way of doing this is to set up a trust fund where the funds, which are not currently being used in the business, are placed in a trust that is separate from the business. This makes it difficult for creditors to reach and access your funds. Even court orders seeking to attach the properties of the owner to pay for business or personal debts can’t dip into these trust funds.
However, there’s a distinction between revocable and irrevocable trust funds. Creditors and court orders can still reach into money placed in revocable trust funds. This is because the business owner still has control over these funds and can revoke the transfer at any time during their lifetime.
By contrast, creditors and court orders can no longer reach into funds put into an irrevocable trust fund. This means that the owner has lost control over the money placed in the irrevocable trust fund and can no longer get that money back. Some business owners even set up offshore bank accounts and trust funds to make sure that their money is beyond the reach of the US government.
First-time business owners are often more concerned about how to boost their sales and increase their revenues, overlooking the protection of their assets. If you want to prevent financial losses from your company, it’s best to practice the tips above to guarantee protection over your assets.