Lawsuits are not filed against people with few assets. They’re usually filed against those with deep pockets. If your company has a great deal of assets, you can’t afford to have all your hard-earned money go to other entities filing lawsuits against you. Thus, you need to have a strong liability protection. The following are some tips to ensure that you can safeguard your business’ wealth from unwanted liability:
1. Increase your liability insurance.
This will serve as your first line of defense. As much as possible your liability limits must be at the maximum, especially if your operations are consistently big-time. Ideally, your personal umbrella liability coverage must be equal to or more than your current net worth. For instance, if you are expected to get $3 million from your father’s estate, call your insurance broker and tell him you need a $3 million umbrella liability policy. Some insurance rates are super affordable, so you shouldn’t hesitate to get an ultra-protection.
2. Consider keeping assets separate.
Depending on which state you live in and your windfall’s source, if you choose to deposit your money into a joint account with, let’s say, you spouse, the amount deposited could automatically become partly theirs. It might not sound like an issue for some, but it’s the cause of trouble for many others. For example, if you have children in your previous marriage and share an inheritance you receive with your new spouse, your children could get way less than you expect when you die. If you don’t intend to have your new spouse get the ownership of the windfall, set an appointment with your lawyer and keep your assets separate. The same thing goes for any business setup, don’t create a joint account even with business partners unless necessary. If you really need to, keep the amount to the minimum.
3. Formalize informal partnerships.
Business partnerships are naturally risky. Like joint accounts, you’re responsible for your business partner’s actions. A lawsuit against your partner can place all of your shared assets at risk. Even your personal assets can be at stake. That is why forming an LLC or a corporation is better since it has more convenient legal protection.
4. Create business entities to shield assets.
In case you have a small business with no formal business structure, you’re in a sole proprietorship venture. Since it’s “sole”, you have no partners to worry about. However, all of your personal assets could be at risk if you get sued. It’s best to make a business entity which protects your personal assets from lawsuits against your company.
The bigger your assets the more prone you are to lawsuits. Do whatever it takes to protect them. As much as possible, get help from the experts to make sure that you’re on the right track. Check David Barcomb accounts since he’s one of the well-known financial advisors that can help you shield your prized wealth and possessions. The best time to get ready is today.