It doesn’t need to be said that starting and running a business is far from easy. It requires a lot of research to develop and implement the business idea correctly to ensure a product or service is sellable. The new business owners also have to find the right partners to ensure everything runs smoothly. All this can ensure they build a brand that can attract and retain customers.
However, it’s safe to say that none of this is a walk in the park. It can become even more challenging when companies don’t know how to manage their finances. That’s because ill management of resources and investments can have damaging consequences like loss of investments.
One of the most important things to remember when starting a business is the protection of its assets. After all, these are precious items and resources that generate great value for companies, whether it’s in the present or future. This means that businesses must first understand the risks to generate a plan to prevent claims from creditors.
In this blog post, we have listed detailed advice from experienced business lawyers about protection of assets for a company. If you’re interested in learning more, keep scrolling to read more.
Understand the Company’s Business Assets and Liabilities in Great Detail
First, it’s imperative to understand the business’s worth and how much it can offer. That’s because it can help the business owner assess how much time and effort must be devoted to the business. When a new company understands this, they have the resources to create a strategic plan for how much they should invest as well as any risks that can arise.
The best way to gauge this is by making an assessment of all the assets and liabilities a company has. Not only does this help create a clearer picture of the business’s present financial condition, but it also positively affects the future performance. After all, having clear and accurate information about the company’s assets and liabilities can be helpful in making informed decisions regarding its investments.
Let’s take a step back and understand what these assets and liabilities are in the first place. Assets are properties (both tangible and intangible) that add value to a company and increase its equity. On the other hand, liabilities are things known to decrease a business’s equity and value. When organizations have more assets than liabilities, they become financially stronger. Meanwhile, any company with liabilities outweighing its assets is knee-deep in trouble and almost going out of business.
Assets include cash, company vehicles, equipment, investments, inventory, machinery, real estate, and other properties. On the flip side, liabilities entail cash owed to suppliers, debt from banks, mortgage debt, money owed as wages, taxes, and more.
A company’s assets and liabilities are both displayed on the balance sheet, both current and non-current. Companies can assess these values under different accounts. They can also further classify them into smaller categories.
Moreover, it can be beneficial in calculating important ratios that reveal the financial health, efficiency, and liquidity of assets. These are current ratios of assets like cash and investment, quick ratios that represents how efficiently a company meets obligations. This also includes asset turnover ratio that reveals how efficiently a company is able to utilize its assets. It also consists of debt-to-equity ratio, inventory turnover ratio, and more.
Keep a Record by Documenting All the Assets the Company Owns
It’s the business owner’s responsibility to ensure all of their company’s assets are documented as accurately as possible. After all, it helps them stay on top of who owns what with proper record to back it up. This is called asset ownership. It ensures the protection of all company assets. In case there’s some confusion about an asset, consulting a business lawyer can be beneficial in figuring it out.
Asset ownership refers to keeping all records of legal ownership when it comes to tangible assets owned by a business. These can also include those assets that are important for a business’s processes. This legal document acts as a record or a piece of evidence that verifies the company’s ownership of the particular asset. It generally includes all assets from real estate and buildings to machinery and equipment as well as intellectual property.
First, it’s important to divide assets into two major categories according to their ability to convert to cash. These are referred to as the current assets and fixed assets of a company.
Current assets are line items in balance sheets that are generally expected to be consumed, sold, or exhausted during the fiscal year through regular operations. This means it entails all of the assets owned by the company that can be converted into cash within that particular time period. These include cash or cash equivalents, inventory of the stock, pre-paid liabilities, receivable accounts, as well as any other liquid assets possible.
On the other hand, fixed assets, also known as long-lived assets, are tangible property or equipment that are long-term. Companies usually own these assets and utilize them during their operations to generate cash and profits. In general, these are expected to convert into cash or consumed at least after one fiscal year through regular operations. These primarily include assets like equipment, properties, plants, etc.
Another great method that businesses use to categorize their assets are tangible and intangible assets. These are monetary or physical assets and non-monetary assets. After classifying and categorizing assets, companies must record them through journal entry.
Create and Maintain an Accurate Inventory of All Assets
For most organizations, assets can play a major role in ensuring success. Whether it’s equipment, machinery, or real estate properties, keeping track of them is necessary to optimize investments and prevent them from being lost or harmed.
Businesses that prioritize keeping an accurate inventory of all assets can ensure security and protection of such company assets and investments. This can also the first thing that determines whether a business is properly protected against the loss of equipment than anything else. After all, it’s not uncommon for companies to lose large assets.
Creating an asset inventory means having a large database of all information regarding the equipment, properties, tools, etc. This database should be able to keep track of the location of assets in real time. Not only will this protect the company assets, but also gather important information that businesses can utilize to make informed decisions regarding investments.
Hire a Business Lawyer to Protect Assets
The final strategy for protecting company assets is to hire experienced business lawyers.
It doesn’t need to be said that establishing a company can be a long and arduous process. Legal help can ensure your newly-formed business has all its assets accounted for and has detailed tax records.
For many new businesses just starting out, their intellectual property is just as important (if not more important) than tangible property. Hiring a business lawyer can be the crucial step where both are protected and business owners don’t risk losing them. This also entails protection of important and sensitive business information like client lists from any breach through non-disclosure agreements.
Another great benefit of hiring a business lawyer is that they can assist the company in case there’s a lawsuit filed against the organization, especially for personal injury.
If you want to protect your company assets as well as other benefits, consider the lawyers at Nanda & Associate Lawyers today.
At Nanda & Associate Lawyers, we offer various business law services such as shareholder dispute, commercial disputes and litigation, creditor and debtor rights, real estate litigation, debt collection, contractual disputes, fraud, and property damage. Our business lawyers have many years of experience and the knowledge and information to handle any case and ensure desirable results.
However, that’s not all because we also offer qualified immigration lawyers, civil litigation lawyers, personal injury lawyers, wills and estate lawyers, and more. Interested clients can hire our services in Toronto, Mississauga, and Brampton.
Book a meeting with us today to hire our businesses lawyers in Mississauga.
Disclaimer: This article is only intended for educational purposes and shouldn’t be used as a substitute for legal advice.
