You have worked all your life for your family-owned business to prosper. It is not just the fruit of your labor; it is the fruit of the combined efforts of the entire family. However, one simple mistake, one simple miscalculation, and one wrong decision can have it all go down the drain. Owning and managing a business is more than just making profits. You must look out for your business and protect it from risks and pitfalls.
There are many ways to protect your business from unforeseen risks. Asset protection, insurance, and seeking the expertise of a family law attorney can help keep your business protected from claims and other risks.
Know the Risks
Before you can take action to protect your business, you must know and understand the risks to your business. The common risks and pitfalls that you must be aware of and be prepared against are the following:
- Damages claims. Damage claims are meant to compensate a victim for his personal injury, suffering, treatment, and loss of income due to the alleged negligence of your business.
- Product liabilities. Product liabilities allow a victim, who is alleged to be injured by your defective or dangerous product, to bring claims against your business.
- Claims and lawsuits. Your business can get sued, which can put your assets at risk.
- Debt obligations. Should you fail to pay your debt, creditors can run after not just your business assets, but your personal assets as well.
- Divorce and asset claims. In a divorce, without any protection in place, your spouse can legally stake their claim in your business and personal assets.
Plan for Asset Protection
Asset protection refers to ways and means to guard your assets and wealth against risks of losses and seizure. It is legal protection for your business that can deter lawsuits and claims, preventing losses through the seizure of assets. It can provide you wealth protection against creditors and other claimants. Through asset protection, not only do you protect your business, but you are also protecting personal assets. Should claims be filed against you, an asset protection plan can protect your assets from seizure, even when judgment has been passed.
Asset protection strategies include setting up a corporation. A corporation is an entity run by multiple people, which are members of the board. In a corporation, the board of directors, officers, and shareholders do not have personal liabilities for the debts owed by the company or any personal injury claims. Creditors and claimants can only run after the assets of the company and not personal assets.
Get Proper Business Insurance
An insurance policy in place can also help protect your business against claimants. Accidents can happen, and anyone can file a personal injury claim against your company. Liability insurance can help protect your business from lawsuits and damages. A premises liability insurance, for example, can cover for any accidents and injuries that may occur in your business property.
Keep Different Businesses Separate
If you own multiple businesses, it is only right to keep each separate. If one of your businesses get into trouble and gets sued, it will protect your other businesses and assets. Set each business under a different business entity. This way, if one of your companies will fall, it will not drag the others along with it.
Another option is to name some businesses under your spouse so that they cannot be touched by creditors and claimants who are after you.
Have a Prenuptial or Post-Nuptial Agreement
Years ago, people scowled on the notion of prenuptial agreements. However, prenuptial agreements have become more common, especially for couples who have assets to protect. A prenuptial agreement is nothing to frown upon. No one wants to think that they will run into problems in the far off future, but having a prenup in place can protect the assets that you and generations before you have worked so hard for.
A family law attorney can help you write an effective prenuptial agreement. Your prenuptial agreement must contain the following information:
- The value of the business at the date of the marriage
- Indicate the percent of shares your spouse will have in case of a divorce
- Indicate what will happen to the gains and losses of the business during the marriage
- Indicate how your business will be evaluated
If you start a business together, consider a post-nuptial agreement. A post-nuptial agreement will protect each of your interests and that of your business. That will ensure that even in the event of a divorce, your business will not suffer. A post-nuptial agreement should have the details on how the company started. It should indicate how the responsibilities were shared and divided between the spouses.
Running a business effectively is not only about earning profits and making gains. It is also about setting safety precautions in place to protect your business and assets.