Protect Your ASSets in Business

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Protect Your ASSets in Business

By Stephen Bucaro

Many people are starting an online business without a
thought about the danger this may pose to their personal
assets. The type of protection you need depends upon the
nature of your business and the amount of your personal
assets.

If you have no personal assets, you probably don't need
much protection. They say "you can't get blood from a
turnip". Hey, if someone wants to take over your credit
card debt, they are welcome to it!

But if you do have investments, or own a home, and someone
sues your business, they could take your personal assets.
If you do not incorporate your business, by default it is
a "sole proprietorship". This means your business is YOU
and your assets are at risk.

If your product is something like greeting cards, then you
are not extremely vulnerable to a lawsuit. You would think
it would be difficult for someone to be harmed by a
greeting card, but someone might interpret the prose on the
card as personal character defamation, or they might get a
paper cut from the card. Remember a few years ago when
a lady sued McDonalds after she burned herself by placing a
cup of hot coffee between her legs?

If your product is a food item or a physical object, you
could be especially at risk of a lawsuit. The list below
provides some steps you should take to protect yourself if
you run a business.

1. Incorporate your business. A corporation is treated like
a separate individual. If the corporation is sued, your
personal assets cannot be taken. You don't need to pay a
lawyer $1000 to file the papers to incorporate your
business. You can do it yourself for about $50.

2. Post a disclaimer on everything you make. Your
disclaimer should include a phrase like; "you do not make
any warranties of merchantability or fitness for a
particular purpose, either expressed or implied. By using
this material, the user assumes complete responsibility for
any and all damages resulting from that use."

3. Provide a "limited warranty" that defines the specific
things that you guarantee about your product. If you don't,
then your product is subjected to the default general
"warranty of merchantability". Basically an unconditional
guarantee.

4. If mis-assembly or misuse of your product might cause
damage, then you need to provide complete instructions.
Clearly state the proper use of the product and place a
warning about misuse of the product.

5. Place large clear warning labels on your product and
the packaging. The presence of warning labels has protected
many businesses from large legal settlements.

6. Write a complete manufacturing specification for your
product. Many lawsuits are based on the presence of a
"manufacturing defect". Although a specification can work
against you, if you don't have a manufacturing
specification, that in itself is evidence of negligence.

Don't jump into starting a business without taking steps to
protect your personal assets. A business failure is a sad
thing, but a business failure where you also lose your
personal assets is a tragedy.

And by the way - I make no warranties of merchantability or
fitness for a particular purpose, either expressed or
implied. By using this material, the reader assumes
complete responsibility for any and all damages resulting
from that use.
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