One of the most confusing things about starting a business is understanding the tax law and all of the insurance requirements. When you’re just starting up, you’re probably not focusing as much on asset protection as you are trying to figure out how to keep what you’ve got and how to really get things going. Just because you incorporate your business doesn’t mean that it gets any easier.
Take Inventory Regularly
It’s important that you take the time to take inventory of everything you own. This is more than just what you plan to sell. It’s everything that you have and that is a part of your business.
You need to get a good overview of your belongings so that you can seek out adequate asset protection. Insurance policies should be taken out to cover what you have and will likely have. If you just try to guesstimate, you will likely over or underestimate the actual value of the items that you have. This can then lead to an inadequate insurance purchase or one that costs you significantly more than what you needed to charge.
Keeping a regularly updated inventory is equally important for maintaining the corporate veil. Corporate asset protection in a creditor action requires that the assets be used for corporate purposes and other formalities followed through upon. Keeping good records, minutes of the meetings, and the like are also excellent ways for maintaining the corporate veil and thus maintain corporate asset protection. If you make it a habit of routinely updating your assets in your inventory with details regarding their condition, warranties, and the like, it may even fall into the business record exception of the rules of evidence, meaning that you will be more likely to succeed in introducing them in court as evidence.
Get Everything in Writing
You also need to make sure that you get all of your agreements in writing. While oral contracts are binding, the difficulty comes in proving them. You may also run into problems with the Statute of Frauds. Your contract will not be enforceable, for instance, if it is for a sale of goods that costs more than $500. The other benefit of getting your agreements into writing is that you will be able to have greater clarity for what’s going on in your situation.
In dealing with banks and other larger institutions, you won’t have a problem getting the basic matters in writing. Where you may struggle is getting certain additional provisions or deviations from normal policies. However, if a bank representative promises you some special exception to a typical clause in the agreement, remember that you must get it in writing or else you may not be able to prove it sufficiently in court. In most states, the written agreement controls unless extremely persuasive evidence can be brought forward to demonstrate the existence of an oral agreement.
Set Up a Budget and Stick to It
When starting your business, even as a corporation, you have to keep a close eye on where the money goes. Credit cards and lines of credit are fairly easy to get these days, and it doesn’t take much time to wrack up a large bill. However, you have to exercise restraint. You should set up a budget for your business from the start and then follow it strictly. One of the main reasons that businesses and corporations close their doors relates to solvency. By setting up a budget at the very beginning and keeping yourself in check, you will help to protect the business from overspending.