Owning your own business means that you’ve put a lot of time, money, energy and sweat into building it. Many business owners don’t know how to keep their business assets and personal assets separate. But, the ones that do know how might have trouble keeping those finances safe from business creditors.
Businesses are in danger of being sued by customers on a daily basis, which is why business owners need to protect their personal assets from creditors.
The best way to protect your personal finances from business creditors is to separate your business from your personal life. This is done by creating a separate legal entity such as an LLC or an S Corporation.
Once you determine which legal entity you want declare your business you still need to keep the money separate. The business should have its own bank account, credit cards and documentation from your personal ones. This will help show how the money is being used, which should not be for personal purposes.
Some businesses like to combine personal and business accounts into one in order to cut down on the documents involved and save money on fees, but this is how your personal finances can become tied up in business liabilities.
Any business that registers as an LLC or S Corporation will receive a tax identification number, which means that your personal Social Security number should not be associated with the business.
Business accounts should not be used to pay personal expenses. If you operate as a sole proprietor, consider using a “doing business as” name for the company.
If a company has to file for bankruptcy and has deemed itself a separate entity, the owner’s liability and personal assets should be protected.
Another important thing to consider is insurance. Make sure you have umbrella insurance, which might protect you if named alongside the business in a lawsuit. Make sure the business also has premises liability coverage, which protects the company if someone falls on the property.
Protecting your personal assets from business creditors can be complicated. Visit our page to learn more about business bankruptcy today.
