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An Individual Voluntary Arrangement, popularly well known as IVA, is a debt answer that can help you prevent going by the aria of bankruptcy. It is a legally contracting consent between you and your creditors wherein you can simply solidify your fascination rates. You moreover have the value of going in for descend payments. It is most appropriate recommended to prevent filing for bankruptcy as it .. more …
The Type of Debt Can Influence the Ultimate Decision Before a declares bankruptcy, the sort of debt due should be taken in to care as it plays a poignant purpose as do other factors that can change the preference of either to assert bankruptcy or not. There are specific primary considerations that can start the last preference together with the form of bankruptcy that a person chooses.Some .. more …
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Bankruptcy is a selection many ponder when faced with bulky multi-part debts. But financial experts consent that dogmatic oneself broke should be an gladdened individual’s final review to encounter his dues. It may giveaway a person’s thoughts from the pressure of profitable his debts but it can moreover severely damage the person’s spirit and credit story for a long time. Aside from this, people .. more …
There are simple ways to tell if you are a candidate for bankruptcy. While this may not be the most encouraging news, it can be helpful if you are to make any lifestyle or fiscal changes to help change the future of your financial situation and right the ship in terms of your money management skills. The bottom line is, of course, how you choose to handle the news of impending bankruptcy and .. more …
Many entrepreneurs understand the benefit of small business incorporation, but they don’t realize how easy it is to lose their “corporate status” if they get sued or end up in bankruptcy. This is dangerous because then the court can come after their personal assets (like their house, car, savings, etc)!Today, I will review a little bit of why incorporating is so important for small business .. more …
Many entrepreneurs understand the benefit of small business incorporation, but they don’t realize how easy it is to lose their “corporate status” if they get sued or end up in bankruptcy. This is dangerous because then the court can come after their personal assets (like their house, car, savings, etc)!
Today, I will review a little bit of why incorporating is so important for small business owners, and then tell you five simple steps you can follow to protect your personal assets, even if your business gets sued or goes through bankruptcy.
Small business incorporation makes sense for a couple of reasons. First, because it protects you from personal liability, and second, because it offers you some great tax advantages. For today, we’re going to just focus on the personal liability part.
When you incorporate, your business becomes like another person. This other person has it’s own bank account, it can own things like property, and it can take risks. Even if that “other person” (your business) goes completely bankrupt or gets sued, you are safe (assuming you do everything correctly).
This is important because many new businesses fail, but you as the entrepreneur don’t want to fail. You want to pick yourself back up and start your next business which will be even more successful. Failure is a necessary way to learn, so we want it to be as painless as possible. Small business incorporation is the key to doing just that.
When everything works like it should, then yes, you personally are protected. But there are certain situations where your corporate status doesn’t help you out, and every business owner should be aware of them!
You see, setting up a company gives you so much protection from liability, that unethical people in the past have tried to take advantage of it. They have gone through small business incorporation just to create “shell corporations”, or businesses just for the purpose of liability protection, to help them get away with various crimes.
Of course, the law had to be modified to weed out these people and make sure they were appropriately prosecuted. But in the process, the requirements for honest small business owners became tougher. Some extra steps are now required to make sure your corporate status stays intact.
By the way, whenever a court decides to waive the corporate protection and actually prosecute the owners behind the company personally, they call it “piercing the corporate veil”. (Lawyers always like to come up with fancy names for things.)
Following are the top five ways to protect you personal assets after going through small business incorporation. Make sure you do these correctly, and you can be sure that even if your business experiences a colossal failure, or gets sued out of existence, at least your personal assets are safe and you can start over.
1. Never Engage in Fraud or any Criminal Act
This sounds simple, but many small businesses owners unknowingly break the law. Never sell a product you know is defective or doesn’t work, misrepresent something in your advertising, forge any signatures, or pull a bait and switch (offer a great deal to get people in the door only to tell them it is out of stock so you can sell a substitute.) Run your business honestly and with integrity every day, and it will pay off in the long run.
2. Never Misrepresent Your Corporate Officers or Members
Don’t ever lie about who is involved in your company. When it comes time to ask for investors, or get people to support you, you may be tempted to exaggerate about who is actually working with you. If they haven’t actually signed your operating agreement (an important step in small business incorporation), then they aren’t your partner.
3. Make Sure Your Follow All Corporate Formalities
If you are going to claim you are a company, then you’d better act like a company. Small business incorporation requires plenty of little steps that can be easy to forget. That means you have to file all important documents and keep records of them (your operating agreement, articles of incorporation, and DBA for example). You also have to keep detailed financial records. You could pay a lawyer to put all these together for you, but this will cost you thousands of dollars. I recommend taking the time to learn these relatively simple steps yourself. There are some great resources out there.
4. Keep Your Business and Personal Assets Separate
The business has to have it’s own bank account. The money in that bank account is not your money. It belongs to the business. In fact, if you decide one day come along and take some money out to buy yourself a Hawaiian vacation, that is called embezzlement (a crime)! Often, the first time through small business incorporation, new business owners (especially if they are the sole owner) don’t understand this concept. The money in the company is not theirs. The company is like a separate person, and all assets must be treated as such.
5. Never Treat the Business’ Assets as if They Were Your Own
Don’t deposit your personal checks into the corporate account. Don’t use company money to finance your personal life and hobbies. Don’t lend the company car to your buddy for a weekend excursion. Don’t set up a cot in the back of the office and start living there! Again, the business and yourself are two separate people. Treat them accordingly.
With these five basic steps, you can be sure your small business incorporation holds up in court in the event your business goes under.
Many successful business people, from Donald Trump to John D. Rockefeller, went through periods of ups and downs in their life. Not every company they bet on was a success. But they managed to survive and lived to fight another day because they where smart enough to go through small business incorporation correctly. They followed the above five steps to make sure they wouldn’t lose their corporate status in the event of a lawsuit. They made sure that their personal assets were safe, even if the company went bankrupt.
Filing for bankruptcy is an extreme move, not a quick fix. It’s a long, painful process with a huge stigma, and you’re unlikely to be able to get any kind of credit for ten years afterwards. Yet bankruptcies are on the rise. Out of ignorance or stupidity, more and more people seem to be using bankruptcy as a first option, instead of a last resort. Before you do it, make sure you’ve considered .. more …
Are you facing so much debt in your life that you feel like you are drowning and you cannot turn your life around no matter what you do? Is bankruptcy your only feasible alternative to get yourself out of this rut? Bankruptcy is your legal right, if you select to invoke it. But before you jump the gun to apply bankruptcy, you should really seek the help of a qualified bankruptcy attorney to .. more …
Bankruptcy does more damage to you and the people around you than you think! In all cases, it is best to avoid bankruptcy.Bankruptcy seems to be the most convenient and easy way out during times of financial trouble to many. And often people are not ready to go in for the phrase: Avoid Bankruptcy. But majority of the debtors are not aware of two very important things:1. Bankruptcy is not a wise .. more …
In my first book – Advance to Go, Collect $1Million – I describe a lot of my influences growing up. A large one of these being that both my parents were declared bankrupt. The book shows that this while at the time having a really negative impact on my life actually was a turning point for me in terms of changing my outlook and giving me the much needed skill of perspective. That is being able to .. more …
Filing for bankruptcy is an extreme move, not a quick fix. It’s a long, painful process with a huge stigma, and you’re unlikely to be able to get any kind of credit for ten years afterwards. Yet bankruptcies are on the rise. Out of ignorance or stupidity, more and more people seem to be using bankruptcy as a first option, instead of a last resort. Before you do it, make sure you’ve considered .. more …
As applying for loans, credit cards and other forms of credit are easier to come by, so are the bankruptcy rates in the United States. In a ten year period, between 1994 and 2004, bankruptcy rates in the United States nearly doubled. The government’s reaction was to take a closer look at reasons parties were filing for bankruptcy, new laws were instated to ensure that individuals and businesses .. more …
Many companies are at present struggling for many completely different reasons, although the present economic environment is definitely a big issue for many companies. Also, lots of those organizations are declaring themselves bankrupt. It’s always very sad to hear of a firm that has to go through it, particularly when so much hard work has gone into developing the firm in the first place .. more …
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