You have just launched a business in the last year and you are beginning to see real profits leading you far into the black. It is an exciting time. But then one day a customer hurts themselves (through no fault of your own) while on your property. Before you know, it you are being dragged into court while the customer tries to make you pay tens of thousands in medical fees.
This is only one depressingly common scenario that can lead to a startup founder losing their assets. But not only those associated with their business…they may lose their personal assets, as well.
You have to make a concentrated effort to make sure your assets are left untouched and intact. Here are three ways to do that.
Protect Yourself From Lawsuits
Lawsuits are going to happen. It is just a part of living in a highly litigious country where anyone can file a claim, and even have their court fees paid for it they win. So you always have to be ready to defend yourself in court if it comes down to it.
But that doesn’t mean your household has to suffer. You can place a barrier between your company and your personal wealth by forming an LLC. This offers more protection than incorporation or sole proprietorship. You can even create multiple LLCs that separate different aspects of your business.
So if your customer sued you for injury while on property you own, like in the example above, they could only sue the LLC associated with the real estate your business owns.
Protect Your Estate
When a business owner dies their estate is separated according to his will. But estate taxes, fees, and will contesting (especially if the language isn’t that clear) can lead to your assets being carved up and huge parts of it being removed from your family. Just estate and death taxes alone can be in the thousands, even millions!
You need a professional to go over your options, and create a customized plan that will protect you, your company, and your family after your death.
Protect Your Business From Taxes
There are so many taxes associated with small businesses, and probably the most devastating is capital gains tax. This is when something you own appreciates in value over time. So if you had a piece of real estate that was worth $50,000 at the time you bought it, and ten years later it is worth $200,000, you would have to pay the tax on that increase. The larger the value increase, the more you will be on the hook for when you sell.
A Charitable Remainder Trust (CRT) is the best way for most startup founders to protect their assets from this tax. It sets up a trust that is viewed as charitable by the IRS. You can transfer any assets into that trust, and avoid paying those fees.
Protect Yourself and Your Company!
Your wealth is yours alone, and you need to secure it from outside risks. Properly protecting your assets will pay off from the first moment to the last.