With National Small Business Week wrapping up, we first wanted to take a minute to thank all small business owners for all their hard work and dedication. Did you know More than 50% of Americans work for small businesses? Hope you enjoy this post on personal asset allocation.
Why Create an LLC?
The idea of filing as a Limited Liability Company, or LLC, was set in place to protect Americans wishing to pursue a dream of running a small business, without losing it all if something doesn’t work out. Incorporating a company not only adds legitimacy to the services provided, it acts as a safety net, keeping personal assets out of the fire. Forming an LLC might be one of the easiest steps, if not the most vital, to take before an organization gets off the ground…and that is no exaggeration.
Personal asset protection is heralded throughout business circles as the most important reason to form an LLC or corporation, whether building a start-up company or self-owned consultancy. This security blanket wraps itself around everything you own unrelated to a business: cars, other income, and most importantly your home. It separates them in case your business falls victim to a lawsuit. Personal income is also taxed separately from anything gained by the incorporated company.
Unforeseen lawsuits are just a portion of what LLC formation can guard personal assets against. In the late 2000s, our banking system fell apart, taking the economy with it. Housing bubbles burst, jobs were lost, and some were out millions or billions of dollars. The economy IS on an upswing, but like an extended weather forecast one cannot exactly predict when another burst might happen. In many cases, LLC laws will protect owners’ personal assets from being seized or lost due to defaulting on a business loan or a late / non-payment to suppliers. Think about consulting an expert on tax and business law too, as state and LLC guidelines may vary on this topic.
There are other ways to ensure your assets are protected, on top of having the legal coverage of an LLC. Adding insurance on top of your LLC protection may fend off determined creditors going after everything you own. Look into umbrella coverage types of insurance, which protect the majority of assets, including damage to your property. The LLC, in addition, covers property damage caused by others, along with personal injuries to employees.
Here’s another tip: Having a list of all assets, both business and personal, will help you keep track of what you own, what’s at stake, and how much each item is worth. Don’t itemize items solely related to the business or your home, do you have cars? Recreational vehicles? Stocks and retirement accounts? All of these should be included. Take account of your debts along with gained assets every 6 to 12 months.
Business liability is not something people wish to think about, especially while starting out. Facing it is a harsh reality, and one should make sure personal assets are going to be protected. Setting up an LLC through experts like incorporate.com will help begin the process of shielding personal assets from unforeseen turmoil.
Business liability is not something people wish to think about, especially while starting out. Facing it is a harsh reality, and one should make sure personal assets are going to be protected. Forming an LLC will help begin the process of shielding personal assets from unforeseen turmoil.
E.J. Dealy is CEO of “The Company Corporation”, which helps entrepreneurs and small business owners around the country with forming their business entity. Check them out at Incorporate.com. The Company Corporation does not provide legal, financial, or tax advice.