Those who are savvy enough to start their own business likely have enough business acumen to know that certain liabilities come with owning a business. There are steps that business owners can take to reduce this risk. When used wisely these steps can mean that failing in business only sets that business venture back, not the business owner.
Why should I worry about asset protection?
Without taking steps to protect assets, a lawsuit against your business could result in personal loss. If successful, the other party can go after your personal assets — not just the business. This can mean that in addition to the funds that are put in the name of the business your own personal savings, car, and even your home are at risk.
How can I protect my assets?
There are legal tools that allow you to clearly separate your business assets from your personal assets. These tools are only effective when put in use, they are not automatic. One of the most common involves business formation. The business structure you choose for your business can offer asset protection. A corporate structure is one option.
A corporation is created by the rules of state law. Once created, it is its own separate legal entity. This comes with pros and cons. One of many benefits is the fact that it provides asset protection. In contrast, one of the cons of a corporation is the cost of incorporation, the upkeep of corporate records, and additional tax filings.
Other options are available. An attorney in your state experienced in these legal matters can review your situation and discuss which options are best to meet your needs.