While the difficulties of starting a tech company from scratch are well documented, that doesn't stop budding founders from around the world trying to make a name for themselves in the startup world. However, if the multitude of tasks related to launching a startup don't scare you, there are still plenty of dangers lurking right around the corner to sabotege your success. Luckily, this guest post from Laura Johnson, a member of the Founder Institute network, outlines how you can develop an asset protection plan to build a sustainable business.
As a business owner, you already understand that business is fraught with all kinds of risks. These risks aren’t just limited to creating a successful business in uncertain economic times, but also includes things you may not have considered much like technological and legal risks.
It’s not enough to just turn a profit. You could still lose your business because of a hacking attack or because of a lawsuit. So, while you’re focusing on developing and unfolding your business plan, transforming your vision of business success into a reality, you also have to protect your technological and legal assets.
Think of Business as A Team Sport
If your business were a football team, then you need to play both offense and defense. You can’t just be good at offense and hope to win the game. Using this analogy, your economic ventures would be your offense, while your technological and legal aspects would be your defense.
Let’s take a closer look at how to improve the defense of the technological and legal aspects of your business.
Technological Defense
Here are at least 3 things you need to have in place to ensure a strong technological defense:
1. Enterprise Security: This should consist of layered content security to protect against targeted attacks and data breaches. Use interconnected solutions where you share data to protect your users, protect your network, protect your data center, and protect your cloud resources.
2. Password Security: You must use long, alphanumeric passwords with a few characters. You must also have a consistent plan to protect your proprietary information. Weak passwords, using the same password everywhere, improper storage of passwords, or no passwords makes it easy for someone inside or outside your business to steal your sensitive information.
3. Data Backup: You must back up all your most important digital information. You can use a server with a different location, use a zip disk, or use a CD. Although you may have protected your computer system through security measures, you could still lose your data through an unexpected physical calamity like a hurricane or power blackout.
Legal Defense
Your asset-protection should go beyond the technological protection of your digital documents. You also need legal strategies in place. This is not something that you should postpone. Lawsuits or claims, like car accidents, are almost impossible to anticipate.
Essentially, you are protecting yourself against claims made against your business. These claims fall into two groups—internal claims and external claims.
Internal claims arise from the claimants pursuing your corporate assets because of an injury that you did not intentionally create. For instance, if you own an electronic store and someone slips and falls on the icy doorstep in winter, then they may sue. These claims are limited to the assets of the entity.
External claims are when the claims are not just limited to the entity’s assets, but also include personal claims. This is legally possible if the claimant can establish that the injury they sustained was due to an act of malice or negligence on your part. For instance, if you had an electronics store, a customer could make an external claim if your delivery driver doesn’t see them and knocks them down as they are getting out of their car in your parking lot. As a result, this injured customer might not just seek a judgment against your corporate assets, but also your personal assets, too.
The way to ensure legal protection is to set up the right type of corporation for your business. You have many choices, each with their advantages and disadvantages. Your choices include setting up a C corporation, an S Corporation, a limited liability corporation, a general partnership, a limited partnership, or a trust.
The right asset protection vehicle depends on the nature of your business, and it is advisable to discuss the matter with an attorney to get an informed opinion on your best choice.
Build a Defense Team
In summary, it’s not enough to create a business that serves the marketplace well. You also have to create one that protects you from vulnerabilities and so should aspire to protect every aspect of your company.
Since designing the perfect technological and legal plan is complex, it’s not something that you can simply decide on by reviewing a list of options. Instead, think in terms of building a defense team This might include a technological consultant, a lawyer, and any other professionals (like say, an insurance agent or a financial advisor)
The reason why you should build a defense team is to make sure that your ideas are not based on your limited understanding of how things work. You may also benefit from different points of view on how to protect your various business assets.
While you may be well-informed about technology and law, these are complex subjects and it’s only too easy to make expensive mistakes. This is not a DIY project. So, create a professional team to protect all your assets to create a sustainable business. With just a little bit of big picture thinking you can avoid common startup mistakes.
Laura Johnson is a part time blogger and full time adventurer. She enjoys writing about anything that sparks her interest. This especially includes her passion for business and branding!
(Young confident woman in red cape and mask image by Shutterstock)
