In many respects, a business’s daily operations are straightforward. This includes managing compensation structures, providing employee benefits, and navigating the relationship between staff and management. However, issues surrounding job security can be quite nuanced.
One of the most effective ways to cultivate a sense of job security among your employees is to maintain transparent and open communication regarding vital business information. This can involve sharing insights about the organization’s financial stability and outlining any forthcoming strategic initiatives.
Abrupt changes and a lack of communication can create an environment ripe for workplace gossip, leading to unwarranted rumors about potential layoffs or budget cuts. It’s essential to engage in honest discussions about how specific changes could impact the organization and outline the support available to help employees transition into new roles if necessary.
Job security operates on a dual foundation; it is essential to reassure employees that they are valued and their positions are secure and to address any performance-related issues proactively. If such concerns are addressed, an employee may be aware of any shortcomings in their performance when it’s too late to make necessary adjustments.
As you embark on your entrepreneurial journey, a compelling question arises: What legal structure did you choose to support your business?
Incorporation comes with a myriad of benefits that can significantly enhance your business’s operation and safeguard your personal interests. Notably, one of the primary advantages of incorporating is the layer of protection it offers against business creditors.
By incorporating, you effectively create a legal distinction between your personal assets and your business’s liabilities. This means that if your company incurs significant debts and struggles to meet its financial obligations, your personal assets—such as your home, car, and savings—are shielded from being claimed by creditors.
However, it’s crucial to understand that this protection has its limitations, particularly in the following scenarios:
Personal Guarantees on Loans
New entrepreneurs or small business owners often find themselves in a position where they must personally guarantee loans or contracts with suppliers, especially in the early stages before the business has established a solid credit history. When you sign such guarantees, you are making a commitment to repay the loan or honor the contract if the business fails to meet its obligations.Bottom Line
By personally guaranteeing a loan, you effectively relinquish the protective benefits associated with incorporation. In the event of a default, your personal finances become vulnerable, and you may find yourself personally accountable for business debts.Signing Contracts in Your Name
A vital aspect of conducting business involves entering into contracts with service providers, suppliers, or partners. However, how you sign these agreements can have far-reaching implications. If you sign a contract in your own name rather than on behalf of the business, you could inadvertently expose yourself to personal liability.Bottom Line
Always be meticulous when signing contracts. Ensure you sign them as the owner or director of the business, for instance, as “John Doe, President of XYZ Inc.” This distinction clarifies that the business is the entity responsible for fulfilling the contract’s obligations rather than you personally.
Using Personal Credit Cards for Business Expenses
When running a business, especially as a sole proprietor, it’s common for personal and business finances to become intertwined. While it might seem easier to use your personal credit card for business purchases initially, this practice can lead to unintended personal liability for those expenses.Bottom Line
Always use business funds for expenses or obtain a credit card under the company’s name to safeguard your personal assets. However, keep in mind that if the bank requires a personal guarantee for that business credit card, you could still bear personal responsibility in case of default. Always review the terms of your agreements carefully!By being aware of these considerations and the implications of your choices, you can better protect both your personal assets and the long-term viability of your business as you navigate the challenges of entrepreneurship.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
