Business owners often overlook the importance of protecting their personal assets from their business liabilities. And even if they have strategies in place already, most of them forget to monitor new rules, laws, and regulations that might be detrimental to their personal assets. While there is no assurance that your business will thrive and succeed, what you have total control over is the value of your personal assets. Building your wealth takes time. Just because you’ve built wealth already doesn’t mean you have to take a risk on it through your business.
At the same time, you might also be jeopardizing your business assets when you do not have the measures in place. Any divorce lawyer will tell you how risky it is not to protect your business assets against the possibility of a divorce. You might find yourself penniless and without a business because your spouse has taken away everything.
Choose the Right Business Structure
A company should be its own legal entity. This means that the owner, partners, and investors will only be liable for the debts that the company incurs up to the amount unpaid on their shares. Though the company can eat up their share’s value, their personal assets will be protected, thus also protecting the company’s assets if the shareholders suffer personal financial losses of their own.
When it is finally time to expand your business, a limited liability structure is also the safest bet since it provides an opportunity for growth through raising capital. Businesses with an LLC structure will usually offer company shares to investors. The company will not incur debts with interest charges.
Draw Employment Agreements
Make sure that your employees are prohibited from sharing information, data, and documents about their work. They cannot reveal records, formulas, and intellectual property to anyone outside the organization. This should be part of their employment contract. That will make this agreement iron clad. If they share information about the company and its operations with others, they could face a lawsuit.
Apply for Trademarks, Copyrights, and Patent
What better way to protect your business than secure what you have formulated, invented, and created? Depending on what kind of products and services you produce, you can apply for intellectual property rights under these categories: trademark, copyright, and patent. This will document your ownership of a brand name or logo, as well as of a piece of machinery you invented, for example. It is designed to safeguard your ideas and your brand.
Suppose you secure your business with intellectual property. In that case, you are basically telling everyone that they cannot replicate and copy your brand and anything associated with it—products and formulations included. This is the best way to protect your business assets if you are a startup. Tech companies, most especially, benefit from intellectual property laws.
Secure Your Information
Even as the world goes digital, you will still have paper documents in the office. Make sure there is a limited number of people with access to these documents. Contracts and other confidential documents should only be accessible to employees who need to see and know about them.
If others have to review such sensitive documents, make sure that there is a form that they would sign. This will create a paper trail. It will be easier to figure out who leaked the information if there is a paper trail.
For digital files, password-protect access to them. Employees should have an identifiable access code to the business’ digital files. This will deter stealing information and selling it to your competitors. Also, back up important electronic records so even if you lose the primary copy, you will still have access to their duplicates. Data breaches and data losses are reasons enough for your customers to look for another organization to support.
Establish Non-disclosure Agreements
Secure all kinds of agreements and contracts with suppliers, outsource providers, and many more. Make them sign non-disclosure agreements so that they are legally mandated not to reveal the terms of the contract they signed with you. Some agreements will also disallow former employees to work immediately with a direct competitor after resigning from their post in your company. This is to prevent them from getting used by your competitors.
There are a lot of components to making a business succeed, but many business owners tend to forget that protecting the business itself should be on top of the list. Imagine the heartbreak when you suddenly face legal troubles, just as when your business is being launched to success. So, cover all the bases as early as possible to avoid the pitfalls when your business is ready for bigger things.