How to Prevent Small Business Liability From Hurting Personal Assets

Step-by-Step Guide

1. 1

   Step 1: Separate your business assets and earnings from your personal income and accounts.

   Have separate bank accounts for your business and personal use, and always make deposits and payments from the proper account.
   
   Don't mingle money or use business accounts to pay for personal items, or personal accounts to fund business expenses.
2. 2

   Step 2: Incorporate your business or register as a limited liability company.

   A small business adviser or lawyer can walk you through the incorporation process and teach you how to prevent small business liability from hurting personal assets.
   
   It takes little work and only a small fee to incorporate your business. , Make sure they are organized in a filing system that makes it easy to pull them up when needed. , Don't get in over your head with expenses or over-borrow to the point where you need to tap personal assets. , Learn about which assets are protected by state law based on your legal business set up or incorporation status.
   
   Some assets like primary homes, life insurance, and retirement funds are protected from legal and credit actions by state law. , Offshore accounts and retirement funds are some vehicles that can be used to protect assets.
   
   You could also transfer them to a child or a trust. , Seek suppliers and lenders that don't require a personal guarantee.
   
   If you must use one, put an expiration date on it.
   
   Some lenders, like the Small Business Administration, will require a personal guarantee. , Have all contracts reviewed by a lawyer to make sure they avoid personal liability. , Liability insurance covers personal injury and property damages caused by you or employees of your business.
   
   Property insurance covers your company's assets and real estate. , If you comply with laws, sell and market quality products and services, and use honesty and respect in your business dealings, you are less likely to face a situation where assets are threatened. , If possible, operate as a sole proprietor.
   
   Partners can sign contracts and engage in deals without your knowledge that can expose you to liability and loss.
3. 3

   Step 3: Keep detailed

4. 4

   Step 4: thorough

5. 5

   Step 5: meticulous records of all business transactions.

6. 6

   Step 6: Set realistic business and financial goals in the first place.

7. 7

   Step 7: Inventory all your assets.

8. 8

   Step 8: Move assets that are not protected out of your name or to a protected fund.

9. 9

   Step 9: Do your best to avoid personal guarantees when signing contracts for loans or supplies.

10. 10

    Step 10: Sign contracts on your company's behalf

11. 11

    Step 11: not your own name.

12. 12

    Step 12: Get insurance protection.

13. 13

    Step 13: Operate honestly and with integrity.

14. 14

    Step 14: Be wary of partnerships and joint ownership.

Detailed Guide

About the Author