Client Alert

Asset protections reduce risk for young businesses

Many people dream of opening their own businesses, but the smart ones realize there are a lot of risks in running one before they are overwhelmed. Mortgages on properties, debts to afford startup costs and outgoings for supplies can all take a toll on a young company.

When a business includes even one asset or property, it’s time to protect it against these possible risks. No one wants cash flow problems or temporary business issues to rob them of the resources they need to keep a business going, especially in the first year when most businesses fail.

One of the most effective types of asset protection for businesses is a separate legal entity like another corporation or trust. The effectiveness of these entities lies in their ability to preserve assets in a different form than the business that may have a claim against it.

Claims can be internal from creditors targeting a specific corporation or external from creditors looking to extract damages from any possible responsible party. Some claims are more likely to cause a problem for people related to a company.

When you know the risks that can be posed to business assets, you have more control over protecting them from claims. Dangerous risks, which can cause more pain from liability, should be avoided or mitigated before a business suffers from it.

An attorney should be involved in the safety of a company’s assets from the beginning. Legal counsel can help create better business charters, prepare legal entities to reduce risk and defend against other challenges to a thriving business.

Source: Investopedia, “Asset protection for the business owner,” David Rando, accessed June 01, 2018

Posted in Asset Protection, Client Alert.