As a business owner, your company’s assets are among your most valuable possessions and you should make every effort to protect them. This often includes taking more than one approach so your company is prepared to withstand any situation. The following five methods are all effective ways to protect your business assets.
Many businesses are operated as sole proprietorships, which are the simplest form of business organization and the easiest to set up for one-person operations. However, they also offer the fewest legal protections, as they do not differentiate between your personal finances and your business. Owners of sole proprietorships can mitigate this by keeping all business expenses and revenue in a separate bank account, but incorporating as a stronger entity will offer more protection. There are two different types of corporations: S corporations and C corporations. Limited Liability Corporations, or LLCs, are a hybrid model that is popular for many small businesses. Both corporations and LLCs exist as a separate legal entity from your person so your personal assets will not be affected if something goes wrong with your business. There is also the SPV, or Special Purpose Vehicle, which is a specialized type of entity designed to set aside assets for a specific purpose or shield a company from financial risk.
2. Practice Good Financial Management
One of the most effective methods of safeguarding your business assets is simply to practice good financial management. To do this, you may need outsourced or hired financial professionals to help you with best practices. Failing to budget, notice financial trends over time and save adequately could be catastrophic for your company. It is important to follow all best accounting practices, such as having multiple knowledgeable professionals check financial reports, so proper checks and balances are in place. The use of software and automation can also help, so you can send invoices and collect payments more easily as well as send automatic reminders to clients. Good accounting software can automatically provide you with information for taxes as well.
3. Carry Correct Insurance
Another key way to protect your assets is by having adequate insurance coverage. Some of this will be legally required, such as workers’ compensation insurance and commercial vehicle insurance, although it is generally a better idea to carry more than the minimum required. Robust liability insurance will protect your company’s assets if you get involved in a lawsuit while other types can cover financial losses due to a natural disaster or interruption of operations. If you are unsure about the types of coverage you should have or are required to have, a qualified insurance agent can walk you through your options.
4. Avoid Debt
Although debt is sometimes necessary for getting the capital needed to operate a business, it can be expensive. When you take out business loans, you will incur interest for as long as it takes you to pay those loans back. This can add up over time and loan payments can severely restrict cash flow when it is most needed. Instead of taking out a loan, consider saving and growing more gradually. If you are just starting your business, try and fund as much of it yourself as you can. Start with as little debt as possible to avoid being hindered by it from day one.
5. Seek Protections For Your Intellectual Property
Intellectual property can be a complex topic, but it is one of your business’s most valuable assets so it is worth protecting. There are multiple types of intellectual property, each with their own sets of protections. For example, copyright protects a specific creative work. Patents are meant to safeguard a functional design of a particular product while trademarks protect brand names and logos. Always seek the advice of a legal professional when it comes to drawing up contracts or seeking to register intellectual property. Going through the proper registration process for the correct type of intellectual property you are wishing to protect will ensure your company’s lifeblood—its ideas—remain protected business assets.
Businesses should always be looking for new ways to better protect their assets. Without proper safeguards in place, a company’s viability can be put at serious risk. Consider your options and take appropriate action. It’s better to have protections and not need them than need them and not have them.