Starting a new business is both an exciting and terrifying experience at once. There is so much potential for new ideas to create great profit or loss, but it’s normally the fear of loss that makes so many potential business owners hesitate. If things go poorly, it’s possible for entire lives to be ruined, and it has happened before; individuals start up new businesses without protecting their personal assets and lose them all. Fortunately, there are ways to prevent this.
Register as a C Corporation or LLC
One of the most significant ways business owners can protect themselves when starting a new business is to make their new companies into legal entities. This can be done either through registering as a c corporation or as a limited liability company. Both entities have their own benefits and shortcomings, but the most important factor is shared by both options: there is no risk to personal assets. By creating a legal entity under the owner’s name, the owner protects themselves and their partners from any risk to their own personal assets. In many cases, individuals create companies under DBAs, assumed names that are cheaper and faster, and wind up losing far more than they thought they could.
The Business Name and the Owner’s Name
Often, when starting a new business, the owner is eager to get their name out there and become recognized, but this can be dangerous. Whenever checks are signed or official documents drawn up, it is crucial to use the company name instead of the owner’s name. If the company is an entirely separate entity, then if it finds itself being sued, there is no personal risk to the owner. If a lawsuit is directed at a company, but there are documents involved that reference its owner, then the owner’s personal assets may be at risk. Of course, this can be largely avoided by making sure required fees are paid and performing annual maintenance, but it is wise to maintain the company’s finances as separate.
Invest in Insurance
As is probably expected, insurance is a very important part of starting a new business, especially in the case of asset protection. From the inception of the company to its end, there should always be some form of insurance protecting the personal finances of its ownership. Because of this, insurance isn’t something that should be rushed into. It is crucial, when starting a new business, to take a while to look into as many insurance policies as possible and get to know them as well as possible. That way, the decision of what insurance policy to go with is an informed decision fitting of how important it is.
Part of the reason starting a business is such a scary experience is the fear of failure. For those who can push past their fears, it is a great experience. Fortunately, pushing past that fear is significantly easier for those who have their personal assets safe and protected by a few easy, logical steps.