Mother rubber duck leading several rubber ducklingsThe desire for business ownership is on the rise. Today more than ever, people are looking to create their own fortune, set their own schedule and chart their own destiny.

Unfortunately, owning a business or company also means being vulnerable to lawsuits. Whether you’re a dentist, store owner, or dance instructor, know this: by dealing with vendors, employees, and customers, you expose your business and yourself to lawsuits. And they can include anything from sexual harassment to wrongful termination of an employee to breach of contract, and more.

How do you protect your business and assets, to help you sleep better at night and safeguard the future? Especially if you live in a “plaintiff-friendly” state like California, where courts and juries have been known to award large tort damages against business owners?

Basically, it comes down to having a comprehensive asset protection plan that reflects your aversion to risk as well as almost every aspect of your business.

Here are some things to think about to get you started:

Think Planning—Not “Asset Protection”

Think of asset protection as a means to an end, instead of the goal. The “end” should be viewed as general business or financial planning, estate or succession planning, the protection of an heir, or something that kicks in for health reasons–not protection against present or future creditors (although that is clearly a desired outcome).

If you adopt a planning as opposed to an asset protection mindset and get your ducks in a row before trouble arrives, you’ll have a great plan in place and strengthen your case in the event of a business-related lawsuit.

Think Multi-Level Defense

That said, as a business owner, protecting your assets is not only allowed but encouraged by the law. You have every right to have a sturdy defense in place should someone attack your biz!

To do so, you want to have as many ducks in a row as possible—orderly, efficiently and acting in unison. In other words, you need to take into consideration all the factors that would impact your asset preservation.

For example, many business owners choose to incorporate as a simple asset protection measure. However, incorporating alone may not do the job. In one California case, a property manager whose business was incorporated lost everything in a lawsuit—including his life savings. But his friend, who held his property management business in an out-of-state LLC, had a much better outcome: in his lawsuit, his assets were fully protected. In the friend’s case, “LLC” plus “outside California” was the ideal asset preservation combination.

What’s the right asset-preserving combo for your business? There are a number of possible ingredients. Here are a few paths for identifying them:

• Separate yourself from your business by keeping personal and business assets apart.
• Choose the right business structure (corporation, LLC, partnership, etc.).
• Consider holding business ownership in a trust.
• Consider your business venue, as some states have laws that are more favorable to debtors, others to creditors—making it easier to “go after” business assets.
• Combine asset protection planning with insurance, so that one can supplement the other.
• Be aware of other risks to your business (like divorce) and act accordingly.
• Do a cost-benefit analysis of your asset protection options.

Working with an experienced asset protection attorney will ensure you think through the above and more to make planning decisions that are right for you.

Think Positive—AND Take Action

While the reward of business ownership can be great, the risks are just as real. Do you ever have disputes with vendors? Do you own commercial property and worry about tenant and other property-related lawsuits? Are you a doctor who fears a patient may accuse you of sexual harassment?

Free yourself to focus on the rewards and minimize the risk of taking a big financial hit–or potentially losing it all—in the event of a lawsuit. Contact your estate planning attorney to put a smart, comprehensive asset protection plan in place that will help you sleep well and keep living the dream of business ownership.

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