In today’s uncertain financial climate, is there any way to be sure your assets are fully protected? Many business owners, and those who may be considering a startup venture, are unaware of hidden risks that can erode or even erase everything they’ve worked for with virtually no warning.
Fortunately, there are simple, practical steps you can take. By having the right protections in place at the right time, you can ensure that your assets and your peace of mind are secure. Here are the top 6 areas where your assets may be exposed:
- Operating your business as a sole proprietorship. In addition to paying higher tax rates in most cases, sole proprietorships are targeted by the IRS for audits more than any other business structure. IRS statistics show that sole proprietorships are more likely to understate income and overstate expenses. This is where many get flagged for writing off hobbies as business expenses. This risk will increase with health care reform and an incoming wave of new IRS agents.
- Owning safe assets in your own name. Even though they may have nothing to do with your actual business affairs, any asset held in your own name, such as stocks or precious metals, could be tied up (or lost) in a personal lawsuit. It’s a common myth that living trusts or “dba” operating companies can protect the assets or investments you hold in your own name from liability.
- Owning intellectual property in your own name. As with safe assets, holding IP in your own name is also a risky strategy. All the time, materials and sweat equity you’ve invested in any system, product or body of work could be taken away from you if it’s exposed to litigation.
- Domain names. In today’s internet economy, many entrepreneurs rely on domain names for a substantial portion of their income streams. Even something as random as a liability claim from a car accident could cripple your business if they go after your domain names for recovery. Although it may seem like a simple way to save time and money in the beginning, the worst place to hold domain names is in your own name or in the operating name of your business.
- The ownership of your current company. Even having a separate entity like an S or C corporation does not guarantee protection for your assets or investments, unless you have the proper structural details in place. Many “one price fits all” online incorporation services fail to ask important questions that could mean the difference between security and exposure. Certain high revenue and profit LLCs may be at risk also.