How to Protect Your Personal Wealth as a Small Business Owner Stephen Robert Morse

Starting a business is risky. New business owners have to deal with many uncertainties, such as whether clients will find value in their offering, whether they’ll be able to turn a profit, and what they’ll do if the business fails. Many business owners fear losing it all if their business goes under or if someone sues them. This is especially true for those who fund their businesses with their own capital, or if they don’t have any business insurance. However, even if you are self-funded, you can take measures to protect your personal wealth from the risk you’re taking on as a business owner. Set Up the Right Legal Entity Protecting yourself from business liabilities starts with choosing the right legal entity. If you are operating as a sole proprietorship, your personal assets including your home, investments, and personal property can be seized in the event of a lawsuit or if you owe creditors. Setting up a corporation or a limited liability company (LLC), however, can help shield you and your shareholders from personal liability in the event of judgments or debts against the business. With either an LLC or a corporation, only your business assets would be used to pay creditors if you can’t meet your obligations. The primary difference between these two entities is that the profits and losses of a corporation are taxable to the corporation, taxed at the corporate rate, while the profits and losses of an LLC pass through to the owners or shareholders, who can choose whether they want to be taxed as a corporation or as an individual. You can also layer different legal structures for different parts of your business to add more protection. For example, if you own a retail store and receive rental income from tenants who live above the store, you could set up separate legal entities for the store and for the building ownership. If your tenants were to sue you, the retail business would not be affected. Setting up a layered structure puts more distance between you and any incidents that might result in business debts or lawsuits. Get Proper Business Insurance Each entity you set up should have its own business insurance policy to add more layers of protection between you and your business liabilities. However, even if you set up a legal structure that protects your personal assets, you still could be exposed to risks. For example, say you stand accused of breaking intellectual property laws, or a client sues you for fraud. In such a scenario, you may have to pay a settlement from your own pocket, as opposed to from your business account. Every small business owner should have a Business Owner’s Policy as a first line of defense against general liabilities. This type of policy offers broad protection against several claims that could put your assets at risk, such as copyright infringement or injuries that occur on business premises. It can also help cover the costs of legal defense. If you have a private practice, such as a law firm or doctor’s office — or run a professional services company, such as an accounting firm or consulting company — you may be exposed to other risks and need a more specific type of insurance to protect your personal wealth from business liabilities. Professional liability insurance, for example, helps cover you against claims of negligence, or errors or omissions, that might arise from services you provide to clients. This type of insurance is offered as an addition to a Business Owner’s Policy, but check with your insurance agent to make sure you have the right kind and amount of insurance coverage for your business. Separate Your Business and Personal Affairs Once you’ve registered your business as a corporation or LLC, use the company name on all documents, including property or equipment leases, supplier agreements, and employment contracts. Keep your business and personal finances separate by setting up a bank or checking account in the company’s name. Think about who else might need access to the account and designate signing authority to those individuals as well. You may want to require two signatures for any large checks over a certain amount. If you have good personal credit, you should also consider getting a business credit card to help keep track of designated business expenses. While business cards allow you to start building business credit and give you more financial leverage, they do need to be personally guaranteed, so there is still some risk to your personal wealth. Make sure you are diligent about maintaining corporate records in what’s known as a corporate book, and keeping current with required filings. Many states require corporations to submit minutes and other annual reports. These requirements also differ depending on your type of legal entity, so it’s a good idea to check with your state or local authority, or with your accountant. Missing the deadline for such filings can result in penalties and late fees or, at worst, suspension of the LLC. Have a Contingency Plan Tough times for your business can put a lot of pressure on your personal finances. Put a plan in place to protect yourself and your family against any downturn in business activity. If your small business is your only source of income: Think about creating other revenue streams, such as taking on consulting work or generating passive income from ads on your business blog. Maintain good relations with previous employers in case you ever need to return to a former day job. Set aside savings when things are going well to build up a rainy day fund. Have a conversation with your family about how you can support each other during tough times, and what measures you might need to put in place to reduce your household’s spending. Maybe your spouse’s salary can support your household to help relieve some of the financial pressure riding on the fate of your small business. A contingency plan can be helpful not only to protect your personal wealth, but also to build it. Being diligent about replenishing any funds you may have invested into your business, as well as building up personal savings, can one day fund your next business venture.

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6 Apps to Help You Form Better Habits Alexander Huls

As small business owners, we all have good and bad habits. There are things we do that—for better or worse—we just seem to do naturally day-to-day. As business owners, however, good and bad habits can come with a (literal) price. If you aren’t nurturing effective business habits, you may be depriving yourself of the efficiency your enterprise deserves. Now, anyone who has tried to make a habit out of going to the gym knows that forming or breaking habits is often easier said than done. Habits aren’t just a matter of willpower, but consistency. A 2012 study found that forming a habit, one that will become a part of how you live your life (or run your business), can take up to 66 days. Thankfully, as is often the case in our digital world, there’s help in the form of technology. Google Play and Apple’s App Store are full of apps geared toward building positive habits by offering reminders and guiding you toward your goals. Here are six of our favorite apps that can help you develop new habits to be a more effective small business owner. 6 Mobile Apps for Building Good Habits 1. HabitBull (Android, iOS): Accountability—with a bit of forgiveness. HabitBull is inspired by a streak-based method of habit tracking attributed to Jerry Seinfeld. The concept? Complete a task day after day, and you form a streak. The longer a streak goes, the more you won’t want to break it, and the more likely you are to adopt the habit you want. HabitBull is especially good because, while it pushes you the way you need to be pushed, it’s also forgiving. Most notably, it gives you the option of setting some tasks as “should do, but not essential” so that if you slip up one day, it won’t completely ruin your streak—or your spirit. So, if you aspire to update QuickBooks every day, but miss a day, it doesn’t mean your goal to make it a routine is ruined. Now, slip up more than once, and you’ll start getting into trouble. But this app is built to understand the realities of life. It’s that more encouraging—but still effective—approach that defines HabitBull. A little fun and gentleness are welcome in an app that orders you to do stuff you may not always want to do. Price: Free 2. Habitica (Android, iOS): Build good habits with your team. What if tracking your habits were more like a video game? With Habitica, it can be. Evoking the look of old-school 8-bit video games like The Legend of Zelda, Habitica turns your daily tasks into Castlevania-like little monsters. When you defeat them by completing your tasks, you gain experience points to help you jump a level along with coins to better outfit your character. Don’t complete a task? You lose health and progress. But what really elevates Habitica is that it stresses social accountability. It’s not meant for you to use on your own, but ideally with other people. The app allows you to form guilds with other users and go on adventures together, including facing a big “boss”—like Mario facing Bowser. Here’s the catch: if you don’t complete your task to contribute to the battle, you’re not the only one who loses health. Everyone does. For small business owners with close-knit teams, that can be a highly effective tool not just to work together toward new habits, but also to create a sense of community and shared accomplishment. Price: Free 3. Balanced (iOS): Get positive encouragement. For those who prefer a gentler push to track your habits, Balanced is a good fit. The app is skewed more toward positivity, encouraging you to monitor tasks that lead to habits which make you feel happy and satisfied. It does so by rewarding you with positive feedback, fun animations, and gentle “Do Soon” or “Do Now” reminders. It also has an easy Tinder-like user interface. You swipe down to add a task, left to skip, and right to complete. Balanced comes with 50 pre-programmed activities like “Hit the Gym” or “Be thankful” to choose from; however, these activities tend more towards general lifestyle options. Small business owners aiming to develop the daily habit of tracking expenses in Wave or sending invoices to clients every Friday, for example, will have to enter those in manually. But once they do, Balanced will do a great job of keeping them on track. Price: Free 4. Coach Me (Android, iOS): The digital personal trainer for your habits. Coach Me supports and motivates you toward your goals. Complete a task and you get a “Woohoo!” along with a virtual high-five. Continue a streak, and you unlock milestones. And Coach Me isn’t an app you use on your own. One of its major appeals is that there is a community built into it, made up of real users who can support each other. More common tasks that are shared by several users, like “Run” or “Take Vitamins,” have what is essentially a comment board where users can share insights, ask questions or provide inspiration. If you’re a small business owner with several employees, you could set up a task like “no unread email in inbox by the end of the workday” and get support from each other, or other users, towards achieving that goal. As you work toward that goal, Coach Me employs its robust data system to analyze weekly or monthly trends in your progress, which can be a big help in determining where you’re excelling and where you’re falling behind when it comes to improving your habits. Price: Free 5. Streaks (iOS): Outstanding design with a focus on priorities. If you like your apps pretty, this iOS Design Award winner is for you. Now, Streaks may only allow for six tasks to be tracked at any time, but that doesn’t need to be a limitation. Sometimes the ability to enter an endless number of tasks into a habit app can be overwhelming, making you lose focus, discipline and follow-through. Streaks allows you to hone in and prioritize key habits that will make a difference in your life and business. It’s never a bad thing to have to sit down as a small business owner and think hard about what select few things you need to do in order to improve your working habits. Streaks also stands out in that users have control over when and how they get reminded to do things. Some habit mobile apps can overdo reminders. Streaks lets you customize notification settings for each task your tracking. That way you can make sure reminders are effective, not nuisances you start to ignore. Price: $3.99 6. Strides (iOS): Set S.M.A.R.T. goals and break them down into smaller achievements. Strides is built around the concept of SMART goals, encouraging you to take on tasks that are specific, measurable, achievable, relevant and timely. The “specific” and “measurable” aspects are what differentiate Strides from other apps. Strides allows (or forces) you to dig into the nitty gritty of what you’re hoping to achieve. A welcome feature is the ability to take a larger task and break it down into smaller parts. Say you want to build the habit of maintaining a certain cash flow each month. To make an action plan that helps you attain your goal, you could use Strides to break it into smaller parts like, “Pay all monthly invoices by [deadline] ” or “UpdateQuickBooks once a week on Friday.” That way, you’ll not only have a game plan to achieve a big habit, but will also lock in several supporting habits along the way. Don’t worry if that sounds overwhelming. Strides has a very handy dashboard that makes it easy to see everything you’re working on at a glance. Price: Free