In today’s cutthroat business environment, bad things can happen to good businesses. You don’t have to be negligent, careless, or irresponsible to get a lawsuit filed against you. Today, the best offense is a good defense for your business. To protect your business, it is essential that you take some crucial defensive measures before someone decides to harm your business.
How Do I Protect My Assets From My Business?
Many small businesses operate under the assumption that they are not important enough to be targeted by criminals; only large companies have that misfortune.
However, this thinking is flawed. Unscrupulous people don’t discriminate, and you need to have a proper security strategy in place.
Here are some critical ways you can protect your assets from harm:
1. Maintain a Separate Corporate Veil
Some businesses believe that just setting up a business entity and completing the articles of incorporation will be enough to save you from a lawsuit. However, your business needs to have a separate bank account and a checkbook. In short, it needs to have a corporate veil.
A corporate veil is a legal concept that separates the rights and responsibilities of a corporate from the rights and obligations of its shareholders. To ensure this, it is a good idea to title the property in the name of your company, use the company’s name in all business documents, and maintain all corporate records at annual meetings.
2. Use Legal Means and Contracts
If you act negligently or practice underhanded tactics, it is an invitation for your creditors to pierce through your corporate veil. Fortunately, this is one of the most natural things to avoid.
You can maintain your corporate veil by negotiating a fair and reasonable lease agreement for your rental, ensuring subcontractor agreements on all your projects, and drawing up a document to list down terms in a vital relationship rather than merely relying on an email. Above all, you should not deal with illegal or unethical under-the-table activities.
You should only hire or partner with licensed or insured professionals to help you in your business, whether it is a repairman, a contractor, an asset protection attorney, or a tax advisor.
3. Purchase the Right Business Insurance
Business insurance is one of the essential parts of any business. When budgeting for your business, make sure you allocate a part of your funds towards your insurance premium. Insurance enables you to manage any incident in your industry.
However, it is not enough to get insurance; you need to make sure you get the right insurance policy. Rental properties require entirely different insurance policies than retail stores or professional practice. You also need to make sure the insurance is enough to cover all the critical aspects of your business.
4. Get Umbrella Insurance
As the name shows, umbrella insurance is an extra liability insurance coverage that covers those losses your primary insurance policies may not cover. An umbrella insurance policy may cost anywhere from $300 to $500 a year for up to $2 million worth of coverage.
However, just because you get umbrella insurance doesn’t mean you can afford to be reckless. Your umbrella insurance won’t cover your negligence, recklessness, and criminal or fraudulent acts.
5. Use Retirement Accounts
Retirement accounts can be great tools to protect your savings and to give you substantial tax breaks. Federal law provides limitless asset protection to ERIS-qualified plans, and up to $1 million worth of assets in an individual retirement account if you face bankruptcy. Some states offer even more protection, while others have opted out of the Bankruptcy Abuse Prevention and Consumer Protection Act’s bankruptcy exemptions and excuse a lesser amount.
To use your retirement accounts smartly, check your state laws to find out how much protection it will provide to your funds and whether you can choose between the federal and the state exemption amounts.
If your state provides a generous exemption, you can move cash you don’t need to these protected accounts. Depending on your retirement plan, the annual contribution limit will vary. Also note that you have to be at least 59 ½ years of age to withdraw funds from the account, or it may penalize you.
6. Get Homestead Exemption
The homestead exemption protects a certain amount of your home equity if of a bankruptcy. This is a powerful exemption that protects your residence from the clutches of creditors.
Some states allow you an unlimited amount of home equity, while others offer you only a relatively small exemption. To make use of this protection, see if your home state provides good equity, and also consider speeding up your mortgage payments to protect your funds because if the housing market falls, you will lose access to the equity.
However, if your state does not provide significant equity, it doesn’t make much sense to make larger mortgage payments or pay down your principal.
7. Place Assets in Your Spouse Name
If one spouse has a risky job, it’s strategic to put your assets in the other spouse’s name, as creditors cannot access the separate assets of the other spouse. You can find out this through prenuptial or postnuptial agreements.
Note that if both the spouses are co-debtors to a loan, then they will both be liable. However, whenever deciding to use this strategy, you must carefully consider the consequences of giving the legal rights of your assets to your spouse if of a divorce.
What are the Four Methods of Securing Business for your Company?
Here are four things that every entrepreneur should consider when making a plan to secure your business:
1. Protecting Your Physical Spaces
Unscrupulous people will be far less likely to target your business if it has physical security measures, like locks, alarms, security cameras, lights, and other monitoring equipment.
Since many crimes are often carried out by employees, you may need to set up a system of accountability or a process that controls human errors. That is why things like magnetic access cards with unique codes are an excellent choice for businesses.
You can also train your staff to look out for suspicious behavior. Investing in a surveillance system that monitors your business remotely and sends push notifications in case of an intrusion can be a deterrent to criminal activities and can provide valuable information in case of theft.
Editor Side Notes: If you are looking to securing your business and keeping it safe from thefts, Read this guide on the best security cameras for business reviews in which we have tested the products we have reviewed to make it much easier for you to find what fits best for your business.
2. Preventing Attacks on Data
Around 43% of cyber attacks are aimed at small businesses. Many small businesses have been forced to close when their data is lost or has been leaked.
To protect your business, you need to install business-class firewalls and buy a proper anti-malware application. If your systems are outdated, they are liable to have security holes. Hackers often take advantage of these, so make sure all your plugins are up to date.
Also, train your employees to detect files from suspicious places and not to open, download, or install them. One of the essential things a business should invest in is an automatic backup software that can help you roll back to the time before they hacked you.
3. Securing Intellectual Property
Intellectual properties are all intangible assets that your business owns. These include trade secrets are not in the public domain and patents that protect your invention once it is in the public domain. Trademarks can also help to protect your brand, and copyrights can prevent theft or plagiarism of your content, be it written, visual, audio, a design, or software.
4. Choosing the Right Business Entity
If you want to protect your assets, operating as a sole proprietorship isn’t a great idea. A limited liability company or a corporation, however, can set up your business as a separate entity from the owner. This means your assets will be independent of those in your industry. So in case, your company goes bankrupt, it will not affect your assets, like a personal bank account, retirement fund, or home.
How Do You Protect Your Customers from the Competition?
Customer retention is a big deal for businesses as it can impact your profits and targets. Here’s how you can prevent competitors from stealing your customers away:
1. Understanding the Buying Motive
Companies need to know of why customers are using their services and keep them up-to-date on any changes or any new features. Never take your customers for granted and give your competitors a chance to sweep them away.
2. Becoming a Resource
If you establish yourself as a knowledge leader in the industry and now everything about your products and services, your customers will come to you to get answers to their questions. This way, even if they may be tempted to ditch your business, they may hesitate to lose a great source of information.
3. Providing Hospitality
Hospitality means appreciating your customers and getting to know them a little better. Don’t just see them when your company is facing an issue. Find a reason to contact them. However, there is a fine line between providing your customer value and becoming annoying or pushy. An excellent way to improve hospitality is to organize an information-gathering day, or a working session with lunch included.
4. Anticipating Competitors’ Threats
Businesses must know their competitors’ strengths and their relationship with their clients. If you share your client with another company, that means they are a significant threat to you. Companies would be wise to stay close to these customers, find out what they like about the competitor, and using this information, work out something to improve the customer experience.
Don’t wait to protect yourself when an attack is imminent. The worst thing you can do is to become a tempting target for your opponents while you are vulnerable.
Although this article is not a comprehensive guide, it gives you an overview of some significant issues businesses can face and how to avoid them.