There are many reasons to start a business: make money, make a difference in the world, build a legacy, or continue your family’s legacy. One reason a business owner would not form a company is to let someone take it away. That’s where asset protection comes in. Small business owners may use several strategies to keep their assets where they belong.

Small Business Vulnerabilities

How can assets owned by a small business owner be taken?

  • Lawsuits. Small business owners may be sued because of a defective product or service, a work-related accident, patent and trademark infringement, malpractice, breach of contract, or failure to maintain a safe workplace.
  • Employment-related claims. A small business owner may face sexual harassment or discrimination claims from current and former employees.

Other claims may arise because of out-of-control debt. Divorces are another problem because the business owner may be left strapped for cash or the ex-spouse may even go after the business.

Protecting Small Business Owners

Fortunately, asset protection strategies may help.

  • Business Structure. The type of business entity matters. Personal property owned by sole proprietors usually is not protected from any business-related claims. Partnerships can leave all partners vulnerable to the misfortunes of one. Limited liability companies and corporations offer the most protection for owners. Talk to a business attorney to make sure you are using the business entity that provides the best protection for you.
  • Insurance. The type of insurance a business owner needs may depend on the business. For example, a doctor or lawyer typically will buy malpractice insurance. Other types of insurance may protect against business interruption and workers’ compensation claims. Life insurance may provide enough cash for your family or business partners to continue after you are gone. Finally, long-term care insurance may be used to protect the business from the owners’ incapacity.
  • Trusts. Transferring assets to an irrevocable trust also offers protection for most kinds of creditors and predators. Creditors will find it hard to take assets not under the control of the small business owner. There are downfalls to using a trust so talk to an experienced trust attorney before attempting to establish any trust.
  • Estate Planning. Many business owners may overlook this strategy. However, it’s crucial to consider business assets when preparing an estate plan.

Some people may need one asset protection strategy, while others need multiple strategies. It can be difficult to understand the legal implications of some of those strategies.

Small Business Owners Need to Consider Asset Protection

Attorney Bruce Adams assists clients like you with their business and estate planning matters, including protecting those all-important business assets. Call us at 256-237-3339 to schedule an appointment. We are located in Anniston, Alabama, but help clients in surrounding communities like Oxford, Jacksonville, Heflin, Gadsden, and Pell City.