Limit Your Business Risks

If you’re the owner of a small business, or are self-employed, then it’s recommended that you insure and incorporate. For example, should your part-time delivery man hit a pedestrian, then a corporate shell, such as a limited liability company (LLC), can provide an added layer of protection for your personal assets and reduce business risks. If you own several rental properties, then you should consider holding each in a separate LLC. Be warned:: A shell won't protect you from liability if you yourself are negligent; for example, if you’re the architect of a building that falls down. That's why both error and omission insurance is a good idea to limit business risks even though it can cost thousands. (Check your professional association; some offer attractive group rates.)

If you occasionally conduct your business from your home, then you should get a business "endorsement" for your homeowner's and umbrella policies. Otherwise, if either a delivery man or a client slip on your steps, your insurer will probably tell you that you aren't covered and increase business risks.

Finally, always keep your business and personal debts separate: Never use your "small business" credit card for personal expenses. Further, if you tap your home equity to fund your business, always keep records that show where the money went. The reason for this is that the provision in the new law denying a Chapter 7 fresh start to families with above-median income seems to apply if only what you owe is primarily "consumer debt." If your debts are stemming mainly from business borrowings or a malpractice award, you should be able to use Chapter 7. Although creditors may fight this line of reasoning, it's worth a shot to reduce business risks and protect your assets.