Protecting your personal assets from business creditors, litigants and lawyers is critically important in today’s world. Yet, many business owners are so busy with daily operations they leave themselves exposed to financial disaster because they do not take a couple simple steps to provide protection.
The fact that you are busy will seem like a stupid excuse once you are involved in a lawsuit that threatens your lively hood as well as your retirement. Here are two steps you can accomplish this week.
1) Incorporate properly
Your attorney or CPA can provide advice about weather to be a “C” corporation, “S” corporation, LLC or some other corporate status, but the important point is to establish some type of entity (other than yourself) that can assume the risks of your business.
If you have not taken this step, do so quickly. If you have, make sure your corporation is in good standing with your state. Did you register properly? Have you made annual filings that may be required? Have you conduced annual shareholder meetings and are you keeping corporate minutes?
To have an entity other that yourself, you have to prove the entity has complied with these minimal requirements in order to provide the protection you expect from your company. If you have not or you are not sure, move it to the top of your “to-do” list. There are several companies that do a fine job of this right online
2) Your tax ID number
Many business owners under utilize their tax id number because they suspect it is only necessary for their tax filings. In reality, it is a great tool to establish credit in the name of your company only.
The next time you fill out a credit card application of any kind, put your tax id number where you typically put your social security number. This, then, will cause your company (not you personally) to be approved or denied credit.
Visit your local Staples, Office Depot or Sam’s Club and request a credit application. Use your tax ID number and you’ve just established your first bit of credit entirely in the name of your company.
While this may be a small first step, it is an important step to establishing credit in the name of your company. With proper care and effort, your business credit can grow in size and strength. This will be critical when you look for bigger funding to fuel your future growth.
