September 26, 2017
Entrepreneurs, venture capitalists, and investors alike maintain personal assets separate from their business assets. But, what happens if litigation threatens the business? Even further, wchat happens if that litigation is able to pierce the corporate veil and threatens your personal assets?
As business owners or investors, litigation is a real, potential risk to be mindful of before that potential risk evolves into an actual risk. As such, protecting your assets is a proactive necessity. Here are a few tips for our entrepreneurs:
- Choose your business entity: Each type of entity formation has its pros and cons for protecting your personal assets. A common entity for entrepreneurs is a Limited Liability Company, which acts and is treated as a separate entity. However, if you opt for a sole proprietorship, then your personal creditors can pursue your business assets.
- Maintain Separate Bank Accounts: Maintaining separate accounts (personal vs. business) is one of the hardest practical requirements an entrepreneur faces in the early stages as a business owner. Try to prevent accidental commingling of funds or “loose” accounting; your CPA will thank you come tax season!
- Obtain proper insurance: Research what the risks are to your business and don’t forget to insure yourself. What does that mean? Protect yourself against a disgruntled employee, a breach of contract dispute with a vendor, professional liability, premise liability, etc. All of these are not “consumer-facing” risks but still demand adequate coverage.
- Surround yourself with the best team: You’ll need someone to analyze risks, manage quality control, maintain the finances, develop appropriate marketing, etc. Most of all, retain a business law attorney from the beginning of your business. It is better to have an attorney review a contract for three hours and give you his or her stamp of approval, than to hire the attorney to get you out of a sticky situation which may cost thousands or even tens of thousands more.
For more information on how to protect your assets, please contact the Business Law Group at Gilbert Garcia Group, P.A. at BusinessLaw@gilbertgrouplaw.com.
By Jessica Skoglund Mazariego
Gilbert Garcia Group, P.A.