One of the biggest issues business owners must face is that of risk mitigation. Owning a business comes with a number of risks; one of these is personal financial liability. Taking steps to protect your personal finances as a business owner will allow you to reduce your financial risk. Here are three ways you can protect your personal finances.
Investing in business insurance is one of the best ways you can protect your personal finances as a business owner. Insurance policies can transfer risk from your personal checkbook to an insurance company. There are several types of insurance coverage in which you can invest for your business. These include professional liability insurance, general liability insurance, and business owners’ policies. If you have employees, you should also invest in workers’ compensation insurance. While buying an insurance plan will cost you money in the present, it can save you thousands of dollars in the future.
Establish an LLC
As a business owner, you can protect your personal finances by establishing an LLC. Unlike a sole proprietorship, an LLC allows you to avoid putting your personal assets at risk in the event of financial hardship in your business. While they provide much better protection than a sole proprietorship, LLCs require you to cut through some red tape to get started. The requirements to set up an LLC will vary from state to state, but all new LLCs must file a form with their secretary of state’s office to register. You should also draft an operating agreement for your LLC that lists the details of your business arrangement.
Separate Your Personal and Business Finances
Separating your personal and business finances is an essential step in protecting your personal assets from the risk of a business. Treat your business self as a completely separate entity. Get a business bank account and credit card; pay yourself your salary each month with an official check; separate and save your business receipts; track shared expenses. These are just a few ways that you can separate your business finances from your personal ones. Creating this boundary will help you avoid using all your personal money for your business.
Investing in insurance for your business, establishing an LLC, and separating your personal and business finances are three essential strategies you should use to protect your personal finances as a business owner. Consider talking to a legal business professional if you need some help making these ideas happen for your business.
To protect your business, it’s essential to have a good business insurance policy. Contact us to get a quote on our business insurance offerings!