Ring-fencing personal assets from business risks 

Many small business owners fail to see the point in turning a sole proprietorship into a corporation, especially if there are few or no liabilities associated with the business. Yet, if you carry any kind of debt related to your professional undertaking, it is very important to separate or at least protect your personal assets. The last thing you want is for your business to fail and your home and other assets to fall prey to creditors as a result. The onus is therefor on you to engage in appropriate asset protection to ensure that your personal wealth doesn't become a means of paying business debt.

Using Limited Liability Company Structures

There are a couple of smart ways to protect your personal assets from business creditors. For one thing, you could set up some kind of corporate structure. Depending on the type of corporation you elect to create, the process may entail a small amount of ongoing effort and expense. However, you'll enjoy the shelter and piece of mind that results from placing business assets and debts under a corporate umbrella, virtually separating you (and your personal assets) from your business entirely. You simply need to weigh the pros and cons of this decision in order to determine if it is appropriate for your business and your family.

Protecting personal assets with Family Trusts

Another solution is to set up family trusts designed to protect your valuables from potential claims made by business creditors. How does it work? When you set up a trust, the items you place in it are no longer your property. They are now held by the trust until such time as you have stipulated that they should be passed along to named beneficiaries. If you create a family home trust, for example, as a means of passing your primary residence to a spouse and/or children, business creditors cannot lay claim to it for repayment because it is no longer your personal asset - it is held by the trust.

Taking both steps to provide a legacy

In truth, it's probably best to take both steps. Setting up a corporate structure will help to protect all of your personal assets from claims by business creditors - they can only come after assets held by the corporation. However, creating family trusts not only protects your personal assets from business creditors, but from personal creditors, ex-spouses, and anyone else that may try to claim your assets during your lifetime or following your death. If you want the best chance to protect assets and pass them along to intended recipients, trusts are a must.

So why not learn more and register with TrustUs today.

After all, it's in your hands.