Santa Ana Business and Tax Lawyers On Protections For Your Small Business

Throughout the course of the pandemic, our Santa Ana Business and Tax Lawyers saw many people discover or rediscover their talents and passions and were able to turn their efforts into profit – making and selling homemade jewelry, clothing, baked goods, even offering home organization tips and creating custom Zoom backgrounds. Of course, we are talking about the venerable “side hustle.” 

Your side hustle is really a small business. Your Santa Ana Business and Tax Lawyers know that many small business operators opt to forgo the entity formation process and either operate independently or do business as a sole proprietorship. There are many reasons people don’t form an entity for their small business; they don’t think their operation is large enough to need a formal company, they sell things only here and there – not full time, or they just don’t want to deal with lawyers. 

While it is exciting that your passion and your talents gain exposure to the world, this also exposes you to potential lawsuits. We have all heard a horror story about someone being taken to court for a seemingly benign issue and the verdict resulting in complete financial ruin that nobody saw coming. How does this happen? 

In the world of small business, the way in which someone loses their home because of their business endeavors comes down to a lack of separation. Some call it “risk management” or “asset protection,” in this context, it’s as simple as separation. Operating your side hustle/small business independently or as a sole proprietorship provides no separation between you, your assets including property and bank accounts, and the business. This means that you are the business and are personally responsible, or liable, for any harm that occurs as a result of your product or services. Essentially, should you find yourself in court because of something you sold or a service you provided, everything that you own is “on the table.” This is a terrifying and helpless situation to find yourself in just because you shared your passions and talents with another. Luckily, it is preventable. 

Our Santa Ana Business and Tax Lawyers help clients understand that forming an LLC provides separation between you personally and your business. The LLC maintains its own property and bank accounts, and should you now find yourself in court as a result of your product or services, if properly formed and maintained, only the LLC assets are “on the table.” Of course, there are certain formalities, documentation, and procedures to ensure that the separation survives scrutiny in a court of law, and that is why you should contact your local business attorney. Whether your business is the next Google, or you sell two expertly carved wooden canoes a year; share your passion and talents with the world and protect yourself in the process.

If you have any further questions about asset protection planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at our California asset protection office at 800-244-8814 to set up a consultation.