Reducing the gamble of owning a business through effective planning
Anyone who has lost money at a casino can attest, “if you want to be a winner, you have to walk away from the table a winner.” However, even an unfortunate trip to a casino can provide valuable lessons in asset protection planning for business owners.
Owning a business is somewhat of a gamble in itself. Many business owners up the ante by reinvesting their earnings, or letting them ride to fund future growth. Many take risks such as signing personal guarantees on business debt. When personal resources are “in the game”, they may be subject to liability claims from creditors.
But the gambling known as business differs from the business known as gambling in that entrepreneurs can protect themselves against liability through judicious asset protection planning.
Business asset protection is complex, but its primary objective is risk management. It involves decisions about business structure, ownership of personal and business assets, insurance, and creditor relationships. These decisions may help separate company assets from personal holdings.
Asset protection for businesses is about taking the chips off the table and cashing out some business equity when times are good. Systematically taking chips off the table as they are won keeps the potential for loss smaller. That way when times get tough, business owners can still walk away from the table a winner.
Asset protection involves planning before a liability claim arises, and not reacting afterward. The logic behind this time-honored method is simple. A business owner in the midst of a crisis may have limited options, or not be able to carefully consider their options. Timely planning before a claim arises can help prevent matters from escalating. Unfortunately, the discussion of asset protection planning usually takes place after the business is already at risk, either because a lawsuit has been filed or an accident has happened.