Creating a limited liability company to protect your personal assets is one of the most important business decisions you could make. Far too many business owners have become victims of being sued and having their home, bank accounts, and personal assets taken away from them. LLCs prevent this problem by creating a separate entity for your business that will only allow you to risk money you’ve actually invested into the business. The following tips will help you get the most out of your LLC asset protection strategy.
Understand the benefits of creating an LLC
Unlike sole proprietorships and business partnerships, LLCs offer the best asset protection terms for business owners. Forming an LLC will protect your personal finances and assets if your business gets sued or goes bankrupt. Neglecting to form your business as an LLC could put you at risk in these situations and cause you to lose your home, land, cars, investments, bank accounts, and more. The only place your assets or finances will be safe when this happens is in a 401k or similar retirement plan.
Establish LLC credit
Establishing business credit for your LLC will allow you to protect your personal assets by creating a separate credit history for your business. It will also protect your personal assets by allowing you to open a bank account in your business’s name and obtain an EIN (Employer Identification Number) to prevent you from having to use your personal bank accounts for business purposes. Establishing LLC credit will also allow you to obtain better loans with lower interest rates than you would with your personal credit scores and bank accounts.
Acquire LLC insurance
LLC insurance will protect both you and your business during times when you are personally sued for business activities. While LLCs will offer personal asset protection when your business gets sued, they won’t offer much protection from personal liability if someone sues you instead of your business. Therefore, you should have good liability insurance to protect you and your business from lawsuits.