Owning a business comes with many financial benefits, but there are also some things you need to do to be careful about your personal assets. Without taking the right steps, you could end up mixing your business and personal finances. While this may not seem like a serious issue, keep in mind if your business is in trouble, it could affect homeownership and other personal assets. To properly protect yourself against personal bankruptcy as a small business owner, take the following four steps.
- Get Your Business Set Up Right
The way you set up your business to begin with could have a huge effect on personal asset protection. If you choose to become a sole proprietor, you leave those personal assets exposed for the taking if you end up in a lawsuit or in bankruptcy. Instead, make your business a limited liability company or S corporation. Both of these entities keep your personal and business assets separate.
- Keep Everything Separate
Simply setting up your business the right way won’t completely protect you in the case of financial trouble within your company. You need to ensure all of your finances are separate. You should never dip into your personal account for business expenditures and you should never dip into your business account for personal expenditures. Create separate bank accounts, have a separate checkbook with your company name on it, put your company name on all documents and keep other detailed records to show your business is its own entity. You should also give yourself an official paycheck.
- Strategize with Your Spouse
Another way to protect your personal assets is by strategizing with your spouse when you make large financial decisions. If you are the main owner of the business, you could keep your spouse’s name off of everything business related. Your spouse could be the sole owner of your home and other personal property. This keeps liability and ownership legally separate, though you might technically consider each other co-owners.
- Be Careful
One of the best ways to protect your personal assets is to simply be careful. Organize both your home and work lives so nothing falls through the cracks. For example, when you have items delivered for business, be sure you don’t accidentally put your home address. Any little gray area could look as though you’ve blurred the lines, which allows creditors a reason to keep those lines blurred and go after your personal assets.
Contact an Attorney for Assistance
When you’re faced with bankruptcy in either your business or personal life, an attorney may be able to assist you. Contact a lawyer, like a bankruptcy lawyer from Darrell Castle and Associates, PLLC, today.