Owning and running your own business is one of the most rewarding ways to earn a living and support your family. It’s certainly not easy and many people make significant financial investments to build up an organisation that matches their ambition. Unfortunately, start-up businesses in the early stages of development often lack legal structure or financial protection.
However, as the business grows it may take on employees, work with other companies and, ideally, build up a much larger customer base. This is an exciting stage, of course, but also brings with it a higher level of risk.
If your personal and business assets are not protected, you could lose what you have worked so hard for. Whether you need to ensure you have the necessary legal structure or car insurance for business vehicles, there are some key factors to consider when it’s time to protect your business.
Keep Your Personal and Business Assets Separate
A lot of companies begin as one-person operations which function on a day-to-day basis, with the owner doing what is absolutely necessary to keep trading. This often involves a lot of personal investment, but this is a high-risk strategy in the long-term.
Avoid using the same bank account or credit cards for both your business and personal transactions. This should not only reduce your personal financial risk but should also make it easier to manage the business’s accounts and finances.
To protect your business and your assets even further, you may wish to introduce a legal structure which separates the personal and the professional. For those in South Africa, it is worth considering your options, which should also consider the type of business entity you are, such as Public Ltd or Private Pty Ltd company, or Personal Liability Company, Partnership, or Business Trust, for example. If someone were to sue your business, this may protect you from personal liability. It’s always best to consult a professional accountant or lawyer to advise you on the right structure for your business.
Understand Your Legal Obligations
Once you are incorporated, you will need to comply with legal obligations which include taxes and other fees relevant in your area. You will also need to ensure you keep business accounts and records which are accurate and detailed. If your business is found to be non-compliant, you may be held personally liable for any taxes or fines. Many business owners seek advice and services from accountants to ensure they are not putting their business or personal finances at risk.
Insurance is Key
In all likelihood, you probably have insurance in your personal life such as life insurance, car insurance, health insurance and home insurance. Incorporating your business will provide some protection, but you may also wish to take out insurance for your business. These policies can cover your premises, any business vehicles and in the case of liability insurance, can protect you should you be the target of a lawsuit. Compare several brands and policies to ensure you are protected adequately against all eventualities.
Disclaimer: Information in this article was obtained from relevant internet sources and should not be taken as financial or legal advice.
Understanding the best ways to keep your financial assets in order is fundamental if you are looking to successfully run a business, no matter the size. By sorting insurance, understanding your legal options and keeping your personal and business assets separate, you can be well on your way to success. You will also be safe in the knowledge you have taken all the relevant and necessary precautions should you and your business enterprise experience any hiccups along the way.