If you’re a successful business owner, you should take measures to protect what you built on your blood, sweat and tears. One of the most common risks to a business are lawsuits. Here are several ways to protect your business.
Liability from Our Actions
The liability from your own actions could threaten both your assets and your business. In the legal realm, this has been referred to as “outside liability.” It deals with problems like divorce, car accidents and personal lawsuit claims. Outside liability deals with influences from outside everyday business operations, and it could let creditors attack either your business or your assets.
How to Defend Your Hard Work
First, you should create a financial statement with all the assets at your company. You don’t have to make this complicated, nor should you need the assistance of your CPA. Instead, you list the assets at your company, and you list their fair market value. Some of the assets you might list include:
- Equipment
- Property
- Mutual funds
- Stock
- Your home
Next to the column on assets, you should also list the debts secured by them. For example, you might list an equity line of credit or loans attached to equipment or a mortgage. All this helps to evaluate what equity in your assets will be vulnerable.
Unsafe Work Environments
Based on federal and state law, an employer must provide employees with a safe workplace. An employee might also report the person to OSHA, and the company could get fined for a failure to follow the law. Attorney Juan Reyna says “To combat unsafe work lawsuits, one of the best ways is to make sure you have followed all the OSHA standards. This makes it much harder for an employee to mount a lawsuit against your business.” In addition, you should carry insurance so that if an employee does get injured on the job, he can’t sue you for workers’ compensation. Employees have a federal right to work in a safe environment, and in some cases, they can refuse to work if you have not done all you could to make it safe for them.
Ask for a Quote on Umbrella Insurance
In the event you find yourself as the aim of a nefarious lawsuit, having umbrella insurance will make you feel much better. This insurance usually costs around $300 to $500 per year, but it will cover between $1 million to $2 million worth of coverage every year. It protects your assets from liabilities that happen because of personal actions. When you go to buy umbrella insurance, it won’t be the same as auto, home or business coverage. However, it does hand your creditor a target to aim at and minimize the risk to your business assets.
Keep in mind, while umbrella insurance does help for situations like accidents, it won’t cover reckless, fraudulent, criminal or negligent behavior. This is why a comprehensive asset protection plan could be one of the best decisions you ever made to protect your business. It includes more than insurance.
What to Do if You Have No Assets?
For those who have just started to build their wealth and don’t have the assets, don’t worry too much. You don’t want to scare yourself into buying an unnecessary policy. A solid defense from lawsuits is to protect your business assets before a bad situation tries to wreak havoc on your life.
Asset protection has been intended for the worst case scenario where another person files a lawsuit against your company. You should first check to make sure your asset protection strategy offers you security. When you’re a small business owner, sometimes you lack the resources of a bigger corporation and even the smallest judgment could destroy everything you worked hard to build. An attorney can help you plan this out better so that there are no surprises.