Running a business is a precarious undertaking full of obstacles at every step of the process – raising the initial capital, procuring the necessary equipment, finding talented workers, successfully scaling the operation, and achieving profitability. However, being profitable doesn’t necessarily guarantee long-term success. Various unforeseen circumstances and events could impact the company and jeopardize its entire future. Due to litigation, theft, arson, loss of assets, or insufficient cash flow, the business could fall into insolvency.
An insolvent company cannot meet its due debt obligations with the currently available funds and assets. This does not automatically mean the end for the whole operation. Many companies continue trading during their insolvency and even manage to come out stronger after the ordeal. Navigating through this tumultuous period and choosing the right procedure to follow may be too daunting of a task without the help of an expert.
The laws governing insolvency and bankruptcy vary from country to country and could even differ depending on the region where your company is headquartered. This may necessitate finding highly knowledgeable professionals when it comes to the applicable laws, such as consulting insolvency practitioners London if your business operates in that area.
The experts have the needed expertise, experience, and qualifications to account for the business’s unique circumstances and identify the right rescue procedures. The goal is to reach the best possible outcome within the parameters of the specific situation.
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Property Protection Strategies
Businesses should not just wait for problems to appear. Implementing a comprehensive asset or property protection plan could significantly reduce the risks posed to your business by creditors’ claims.
It is crucial for business owners to familiarise themselves with the available legal options to protect their company’s property and other assets. It is also essential to establish your asset-protection plan as early on as possible. The longer the plan has been in existence, the stronger the protection it provides.
Choose Appropriate Business Structure
The question of liability and your personal responsibility towards existing and potential creditors should be acknowledged even before the business has been formally established. After all, the different business structures offer different conditions for the separation of personal and business assets. For example, limited liability companies (LLCs) owners are not held personally accountable for any business debts or other incurred liabilities.
Separate Your Business Ventures
If you operate multiple companies, strive to keep their assets separate and avoid potential overlaps. This will protect the integrity of the other business operations even if one of them is under litigation, becomes insolvent, or is in the process of liquidation.
Make sure that the separation of the companies and their assets is marked clearly in all banking, accounting, and other essential documents. Any failure in this regard could put multiple businesses in danger by exposing their assets to creditors even if only one of the businesses has been found liable.
Think About Trusts
Setting up a trust can be a powerful asset-protection strategy. Trusts are defined as agreements between the person creating them (settlor, trustor, grantor) and another person managing the assets included in the particular trust (trustee). The trustee is assigned the responsibility of managing these assets for the benefit of another person designated as the beneficiary.
Placing an LLC into an irrevocable trust can provide multiple layers of protection. It prevents creditors from attaching a charging order against the business when trying to sue the owners because the trust owns the business and not the individuals.
In essence, creditors cannot gain access to property that legally is not owned by the debtor. However, keep in mind that for the trust to be effective, it must have been established prior to the rise of any claims. In addition, it will not offer protection from any current creditors.
Provide Physical Protection
The physical protection of the business’ property from theft, arson, unauthorized access, data breaches, etc., is equally as important. Secure entry points with effective electronic locks, dynamically generated or rotating passwords, and appropriately chosen alarm.
In addition, an audio-only alarm may not provide sufficient security on its own, so you may want to hire a security company to check up on the premises when the alarm gets triggered. Make sure that your insurer approves the alarm as well.
A CCTV system can act as a solid deterrent to potential theft attempts. It is also a cost-effective method to monitor remote sites.
Remember that you may need to explain the decision to install CCTV on the location to your existing employee, or they might react negatively to the change. Furthermore, ensure that the system complies with all protection regulations and doesn’t violate any privacy laws.
