There is a big focus on making money with your small business – and that is great. Because the more money people have, the freer they are to live a life that they want. But once you are consistently making good money, you need to protect it too. If you have children, it becomes even more critical to protect your income for future generations. And, being realistic is essential – it doesn’t matter if it 50, 500, or 50000 – it all needs to be cared for.
When you run a business from home, you are unfortunately exposed to a range of issues. Faulty products (even when rigorously tested), employment discrimination, trademark infringement, malpractice, accidents, and workers’ compensation incidents (see more here). Even if everything you do is above board, things happen. So here are some ways to protect your money.
This is a contributed post and do not necessarily reflect the opinions of Meet The Harris Family.
Business Entities
When you are setting up your business, you might assume that you are safe because you are small or you trade in the right ways. But your personal assets are safer when separated from your business ones. There are some legal steps you can take to create a separate entity. Consider if one of the following may be better for you:
- Limited Partnership – You can’t be sued for more than you have invested in the business. All you will lose is your investments.
- Corporations – Asset protection for their owners is what makes this so attractive. There are S or C corporations, both have similar protection for the owners but are taxed differently.
- LLC – One of the most common setups allowing protection for owners but not to the extent of a Corporation.
Insurance
If you are trading without insurance, then you really need to consider why. Some professionals are more at risk than others, so you should talk to an insurance specialist about what you should get. But in general:
- Homeowners Insurance – if you get customers on your property, this will help give you coverage. Look for deductibles you can cover.
- Commercial Liability Insurance – Protection if someone is injured as a result of an action by your employees on the premises.
- Umbrella – This backup insurance can be used when your other coverages are inadequate. If all of your other options are used up, an umbrella policy can pick up the tab on addition required coverage.
- Workers’ compensation insurance – This protects your workers and you if anything happens. There will always be enough liquidity to take care of staff injured on the job – the money won’t come from your pocket.
- Life insurance – It should go without saying that life insurance will help look after your loved ones if anything happens.
Timers
It is often the case that when people start making more money than they are used to, they spend it carelessly. There is much to be said for enjoying your hard-earned cash, but frittering away is very easy. Put everything that isn’t business-related (and even then think about it) on a timer. Shoes you want? Put it on a 30-day timer; if you still want them, then consider buying them after the timer is up. Holiday in the Bahamas? Timer. 4 scented candles? Timer. The more often you put yourself on a timer, the more likely it is you will see that you might be impulse buying.
There is more to looking after money than putting it in a high-interest account, putting safety nets in place will protect you, your cash, and your family long-term.
