When you are an entrepreneur, you give all you have to your venture. It’s understandable. Entrepreneurs bet everything on the success of their own company. However, wise entrepreneurs must also take steps to ensure their personal financial security. If you are the sole owner of your company, if the business fails, you will personally be liable for any remaining debts. Even if business failure is unthinkable now, it is a scenario that you should plan for. Hopefully, your business will never fail. But you should never assume that.
Considering your personal financial security could prevent you from going completely bankrupt. Remember, if you file for personal bankruptcy, which you may have to if the company you own runs into financial trouble, you will later have trouble acquiring a business loan. Therefore, it’s best to take the necessary steps to always have funds available. Here are several ways entrepreneurs can ensure their own financial security on the long term:
Save for Retirement Now
It’s never too early to start saving for retirement. Young entrepreneurs may look at traditional retirement plans with dread. You will have to contribute to these plans in a manner that you are not financially prepared for now. However, there’s an easy way to save as a young person: MyRAs. A MyRa is a stripped down version of the traditional IRA. You can open an account for as little as $25, and contribute as little as $2 at a time. This is the ideal plan for cash-strapped entrepreneurs. Your investment options will be limited, but it’s better than having no retirement plan.
Do Not be Solely Responsible for the Company
If possible, make your company into an LLC or a partnership. If you are the sole owner, yours and the company’s finances become legally the same. When the company files for bankruptcy, it will also be you, personally, filing for bankruptcy. You can prevent being responsible for any debts the company acquires by sharing ownership.
Protect Cash Assets with Gold
Gold is a highly regarded hedge against currency volatility. You can protect cash assets of both the company and yourself with gold. In case a financial crisis or an economic downturn hurts the value of the dollar, the gold you have will protect the overall wealth owned by you or the company. You need to buy physical gold from a firm like Lear Capital. Stocks from gold mining companies do not offer the same protection.
Avoid Taking Out Personal or Installment Loans
If you need money for the business, you should find investors, crowdfund the amount needed, or borrow the money. There are only two acceptable methods to borrow money for a business: business loan or loans from people you know at little or no interest. Do not take out those easy-to-obtain personal or installment loans. These come with sky-high interest rates, which could easily plunge your company and you into serious debt. So, always follow conventional channels to obtain funding for your company and do not go to dubious financiers.
Heeding the above tips will protect your financial interests in the future and possibly prevent a devastating bankruptcy.