Running a business comes with several risks and challenges. You could face claims because of your products or services. You could also deal with lawsuits alleging your financial obligations.
Claims and lawsuits filed against you can put your company and personal assets at risk. Fortunately, there is a process that can protect what you’ve worked hard to build. Knowing this process will give you peace of mind and allow you to return to get back to running your business after a legal battle.
Understanding Asset Protection Planning
As a small business owner, asset protection planning should be your priority as it can affect all aspects of your business. This process will help you protect your property so no one can take them away from you, even if the other party won a case against you.
Asset protection planning will protect wealth subject to claims (nonexempt assets) and make them as assets that claims can’t touch (exempt assets). You’ll have several strategies to consider in shielding your valuables. Cantley Dietrich, for instance, has used basic prenuptial agreements and multi-tiered LLC structures as asset protection strategies for its clients.
The strategies you apply will depend on the type of assets you own. Other parties who are most likely to pursue a claim against you play a crucial role in planning your protection, as well.
The Two Types of Claims Small Business Owners May Face
Depending on the situation, you may face one of two general types of claims:
- Internal claims – these types of claims usually come from creditors with an only limited remedy, which revolves around the assets of a particular entity, like a corporation. If someone were to incur injuries in your corporation’s property, that individual might only pursue the corporation’s assets and not your personal assets, assuming you did not cause the accident.
- External claims – these are claims that allow the other party to pursue claims that can extend up to your personal assets. If someone sustained an injury after an accident involving your truck, for example, the individual could sue the company and you.
Knowing the difference between these two helps you create an effective strategy to protect your assets, especially those that are susceptible to a specific claim.
Handling a Claim Carefully
Facing a lawsuit can be costly and may affect your business’s reputation. That’s why it’s important to handle this kind of situation carefully to prevent further problems.
Hire an attorney to help you fully understand the case. Your attorney can represent you in court and defend your rights. An experienced attorney knows whether the claim is valid and recommends the best way to protect your valuables.
When you receive a complaint, you must submit a response stating your admittance or denial of the allegations filed against you. You may also include your defense and counter or cross-claims as well as what resolution you prefer, for example, a jury trial.
Remember to avoid communicating directly with the other party because anything you say can be used against you. Instead, let your attorney communicate with them.
As a business owner, you must prepare yourself with any kinds of risks. Start with protecting your assets today.