One of the greatest feelings in the world is knowing that your company is making a profit. It is a sign that your vision and leadership have gotten over with both your employees and your customers. However, it is important that you know how to protect your newfound wealth after it has been created.
Sign a Prenuptial Agreement
If you are married, account for business assets in a prenuptial agreement. This ensures that your company is not considered marital property to be divided equally in a divorce. While you may give your spouse a portion of the company, it is less likely that it will need to be sold or closed.
Have a Succession Plan
Your employees, shareholders and customers will want to know that there is a stable future ahead for your company. Creating a succession plan can help create the desired stability. When you decide to retire or are unable to run the company, your employees know that you still have a job while your customers know that they will get the same great product or service as always. Your shareholders are likely to remain invested if they know that the business is capable of making money after you are gone.
Have Business Insurance
The unexpected can come at you, well, unexpectedly. An injury occurring on your company premises, a natural disaster, or even a theft could set present a significant expense. Having insurance on your business can help mitigate all of these risks. If a person gets hurt on company property, you may be liable for medical expenses for that individual. If you have liability insurance then you won’t have to pay for those expenses out of your pocket. It may also be a good idea to incorporate or form an LLC as a means of reducing liability in the event a judgement is entered against the company.
Property insurance can protect you from both natural disasters and theft. Many insurance companies will offer discounted rates if you take additional steps to protect your business, such as newer fire suppressions systems, regular emergency drills, etc. You may also want to consider hiring a security company of some sort, such as Security Services Northwest, Inc. or a similar firm in your area. This is especially important if your business transports physical money between locations on a regular basis.
How Is Your Money Treated for Tax Purposes?
The owners pay FICA and other taxes on that money like they would when working for any other employer. However, it may also be possible to give yourself a distribution of profits, which is treated as ordinary income for tax purposes. It may also be beneficial to keep your net worth tied up in company stock that can be used as collateral for loans. The loans can then act as income but are not treated as such by the IRS.
The ability to provide financially for themselves and their families is the main reason most go into business. Therefore, it should be your top priority to think of ways to protect your assets and ensure that your wealth can be preserved for generations to come.