As a business owner, you need to consider asset protection planning as a way to protect your business and personal assets. You might be thinking, “Do I really need to worry about asset protection if I already have insurance?” The answer is yes. Insurance offers some protection, but in order to secure the future of your assets, you need to develop a solid strategy with other means of protection.
Although 405 business owners are concerned about damages from potential lawsuits, only 15 percent actually have an asset protection plan in place, according to Forbes. Out of the 405 businesses without a plan, three out of five said it was never explained to them that asset planning was an option.
When developed properly, an asset protection plan can protect your assets from being seized by potential creditors and litigants, children-in-law, and potential ex-spouses. There are three parts to a comprehensive asset protection plan:
- Purchase insurance. Insurance provides some level of security, but keep in mind that it’s not designed to protect you from economic hard times or creditors. Coverage is limited to certain risks that are detailed in the policy and by the amount of money that can be paid.
- Separate business assets from personal assets. The best way to do this is to structure your business as a limited liability company (LLC) or a corporation. Operating your business as such will limit your debt to creditors strictly to the assets of the business itself.
- Manage your finances. To protect your wealth, be sure to have as little invested and maintained in the business as possible. Structure your business using a holding entity for business assets, and an operating entity to conduct daily business operations.
For more information on the risk management strategies behind the development of an asset protection plan, contact us today at 800-342-3859 or www.mcgrathinsurance.com.
*This article is for informational purposes only and should not be construed as providing legal advice.