COVID Funding Tips for Small Businesses
In today’s uncertain financial climate, is there any way to ensure 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 names, 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. Many entrepreneurs rely on domain names for a substantial portion of their income streams in today’s internet economy. 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 initially, the worst place to hold domain names is in your own name or 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.
- New joint ventures running through your current operating business. There are many reasons why a second or additional entity makes sense as a simple and affordable way to put a firewall around your most important assets and investments. Certain products or services may carry higher liability risks, and there may be separate intellectual property to protect.
Do you see an area where you might be vulnerable? You are most likely on great terms with all your friends and business associates, and you might be thinking that your business is too small to be a target, but consider these sobering statistical realities:
- There are nearly 80 million lawsuits filed every year!
- Frivolous lawsuits cost the U.S. over $200 BILLION per year!
- Internet lawsuits are increasing more than ever before!
- As the economy struggles with massive debt, lawsuits will increase to all-time levels coming soon.
Make sure your business is fully protected. The basic incorporation steps required to open a business account with a bank are often not enough to protect your assets from other serious tax and legal risks.
This can be corrected easily and inexpensively in most cases, but the longer you wait, the more the risk goes up.
Go to my company NCP, to learn more about forming a complete formation to ensure your protection.