Asset Protection: What You Need to Know
Asset protection is an integral part of any business and part of our Premium Profit™ business model. Whether you are an experienced entrepreneur or venturing into business ownership for the first time, protecting your financial interests is necessary for the continued success of your company. Beyond risks associated with fluctuating markets and demand, unanticipated legal issues can threaten the stability of your business. Being prepared with an asset protection plan can save you time and money in the future.
Defining & Categorizing Your Assets
To begin developing your asset protection plan, we must first determine what your assets are and what potential threats you may face. Cash and other monetary assets are obvious and most businesses have safeguards in place to prevent theft or fraudulent activity that may threaten their profit. Things like timed safes, armored vehicle money transportation, and bank-level encryption for digital transactions are a given in today’s world, but not all threats to your wealth come from such obvious sources. To understand what you need to look out for we have to first define your assets.
In general terms, an asset is any resource you own or control that may generate economic benefit. These are typically classified into one or more of the following categories:
Current: the assets most people are familiar with. These assets take the form of cash, short-term deposits, accounts receivable, merchandise inventory, etc. This category is the most easily converted to monetary value.
Non-Current: these assets cannot be easily converted to cash or cash equivalents. They are considered long-term assets and include things like land and property, machinery, patents, and trademarks. While these assets can be sold and transfer ownership, the process is more complex than with current assets.
Tangible: as the name suggests, these are physical assets that can be seen, touched, or felt. Tangible assets may be either current or non-current, such as buildings, office equipment, undeveloped land, cash, or inventory.
Intangible: on the other end of the spectrum, intangible assets do not have a physical form. These include things like patents, copyrights, trademarks, licenses, and intellectual properties.
Operating: these assets are likely the ones you are most familiar with, as they are necessary for the day-to-day operation of your business. Cash, inventory, office supplies, equipment and machinery, copyrights and patents all fall into this category.
Non-Operating: often considered ‘passive income’, non-operating assets are not necessary for the daily operations of your business but still generate income. This includes short-term investments, marketable securities, interest, and vacant land.
Recognizing Potential Threats
Once you’ve identified your assets, determining what potential threats you face can give you a crucial edge in mitigating risks. While no one wants to consider the worst-case scenario, failing to do so can put you in a tricky situation. Failing to secure your assets can be detrimental not only for you, but your family, employees, business partners, and other dependants. Some of such issues may include:
Workplace theft and embezzlement
Breach of contract lawsuits
Workplace discrimination or sexual harassment claims
Keyperson death, disability, or divorce
The best asset protection strategy for you and your business depends on a number of variables. This includes industry and business operations details, the assets in question, and your risk factors. Consulting a financial business advisor can help you develop a personalized plan for asset protection. As a business advisor and Certified Fraud Examiner, Lydia Desnoyers of DesCPA has over ten years of experience helping individuals and small businesses protect their interests. For more information about how she can help you, contact us today!
All information contained in this post is for informational purposes only, the information found on Descpa.com and its affiliates does not constitute financial advice.