Protecting Your Assets and Best Interest As a Woman In Business
As an entrepreneur and woman of color in male-dominated industries, I know how challenging it is to teach yourself about business and financial literacy. Throughout my career, I’ve opened and operated numerous ventures solo and alongside various partners, and frequently advise women to avoid mistakes I’ve made in entrepreneurship.
After all this time, I’ve got lots of strategies up my sleeve to protect my best interests, and am proud to share those resources with every lady who will listen. In this post, we’ll cover why many women can find themselves at risk for financial turmoil, best-practices for protecting your assets, the financial essentials in entrepreneurship, and my tips for everything in between.
Many of these financial best-practices apply to everyone, but here’s a crash-course of what I tell the women in my corner:
Reasons women face unique financial challenges
Whether you’re an entrepreneur, a 9-5 hustler, or a housewife, there are several common ways women can get blindsided financially, and lots of steps we can take to protect ourselves.
Here are the scenarios I see most frequently where women fall vulnerable to financial troubles:
Income disparities: It’s no secret there’s a gender pay gap. This can lead to lower retirement savings and long-term financial security, and the gap is even wider for most women of color.
Under-bidding: Many of us struggle to negotiate salaries and promotions assertively, advocating for ourselves and our best interest.
Career interruptions (life events): Women disproportionately face career interruptions, mostly due to caregiving responsibilities. These gaps in earnings and opportunities can significantly impact how well we keep up with our male counterparts.
Divorce and widowhood: Women can be disproportionately affected financially during divorce or with the loss of a spouse, especially if they weren’t actively involved in managing finances during their marriage.
Lack of financial literacy: Some women I advise feel less confident than their partners about managing money and making investments, leading to missed opportunities and potential financial pitfalls. It’s part of the reason I became an adult financial literacy teacher after the 2008 recession, and host workshops for clients of all ages and genders.
High healthcare costs: Women tend to live longer than men, and face higher healthcare costs, especially as we age. That’s why long-term care insurance can be great investments for women.
Co-signing loans: I’ve seen women co-sign loans for people they shouldn’t, which leads to financial strain and hits your credit hard if the borrower defaults.
Underinsurance: Women are often underinsured when it comes to life insurance or disability coverage, leaving us or our children vulnerable in worst-case scenarios.
Overall, financial protection for women involves proactive planning, financial education, and being actively involved in managing our own finances. Now that we’ve covered the why, let’s move into how business-minded women like me can help protect their assets at work.
How entrepreneurial women should protect their assets
Being a woman in business comes with its unique set of challenges, and safeguarding your assets and best interests should be a top priority. Whether you're a sole proprietor, in a partnership, or running a large corporation, there are several steps you can take to protect yourself (and ensure the longevity of your business).
Clear Legal Structure and Agreements:
Ensure that your businesses each have a clear legal structure, whether they are sole proprietorships, partnerships, limited liability companies (LLC), or corporations. Setting them up as entities helps to wall off your assets (what some call a liability silo) in case of creditor events.
Each structure has different implications for your own liability and tax payments, so consult with an advisor or attorney to find the one that best suits your needs.
Splitting Business Interests:
For partnerships or multi-owner businesses, you need to have written partnership or shareholder agreements in place. These documents should outline the responsibilities and rights of each partner, how decisions will be made, how profits and losses will be distributed, and what happens in case of disagreements, or when one partner wants to leave the operation. Even if you think you’ll never need them, having these agreements in place can prevent future disputes.
If/when a partner decides to exit the business, whether due to retirement, death, disagreements, or unforeseen circumstances, consider having a buy-sell agreement in place, which would outline the terms under which the departing partner's interests will be valued and purchased. Oftentimes, business partners purchase life insurance policies on one another to finance the buying-out of a deceased partner’s estate/widower/widow. It’s an easy way to front-load those important negotiations before things ever go wrong, and protect both of your best interests.
Protecting Intellectual Property:
If your work involves intellectual property, such as trademarks, copyrights, or patents, be sure to protect your IP. Register your trademarks and copyrights with the appropriate government agencies to establish legal ownership and prevent others from using your intellectual property without permission, and hold people accountable when they do. I recommend working with an attorney to do this.
Financial Planning:
I’m a firm believer that financial planning is crucial for everyone, but it's particularly key for women in business. First, find an advisor you trust. A great way to do this is by asking for referrals for advisors from trusted friends and family, or by interviewing advisors from various firms in your area. They may work in tandem with attorneys or accountants, and may be independent advisors or part of a larger organization.
Once you find someone you think is reliable, work with them to create a comprehensive financial plan that considers your short-term needs and long-term goals, including retirement planning, emergency funds, and investment strategies. This advisor should work with you personally and professionally to safeguard your own estate and your business interests.
For personal financial planning, I’d recommend working with your advisor to:
Start estate planning: Including drafting wills, setting up trusts, and drawing up prenuptial agreements or postnuptial agreements. While I recommend a revocable trust for most of my clients, no matter how your estate is split, work with your advisor to ensure it’s named appropriately for current and future needs.
Ensure beneficiaries are in place for all of your assets that pass by beneficiary designations (such as retirement plans and life insurance policies), and that they’re appropriate for your situation.
Periodically review your documents: A great rule of thumb is with every life event, such as a death, birth, or big birthday. Lots can go wrong if you don’t periodically check your plans. For example, if you have two children now but in the future have a third, without properly naming and/or updating your documents, the third child would be locked out of your estate. Consider titling your assets to something like ‘all living biological heirs’ or ‘any current and future biological or adoptive children.’ A trustworthy advisor will help you do this, and set up regular meetings with you (usually annually) to review your docs.
Communicate your plans to the appropriate parties: Consider introducing your advisor to different members of your estate, such as your spouse or kids, so everyone is on the same page about how things will work if and when you pass away.
For financial planning in business, a reputable advisor can help you:
Develop financial strategies and goals: Whether you need forecasting, investor insights, or help budgeting, advisors can help you understand the numbers.
Risk assessment and management: As a woman in business, work with the right person to help you recognize potential risks and strategies to mitigate them, safeguarding yourself and your business.
Optimize cash flow: There’s lots of ways to optimize your cash flow on a monthly, quarterly, and annual basis. Work to ensure your business has the funds to meet operational needs and invest in your growth when the time is right.
Investment guidance: With profit and growth opportunities, your financial advisor may be able to find investment options that align with your risk tolerance and long-term objectives, or introduce you to someone who can.
Tax planning and optimization: As a business owner, you know there are tons of complex tax laws, especially if you work across state lines. Ask your advisor to help you identify opportunities for tax savings, maximizing deductions and minimizing liabilities.
Succession planning: Once you reach a certain stage and scale, succession planning is essential for a smooth transition of ownership and leadership. Common exits include a sale (to team members or third-party acquirers) or a succession plan to keep a business in the family.
Evaluate business expansion opportunities: Everyone needs help sometimes evaluating the financial feasibility of fun, shiny new goals, like mergers, acquisitions, or expansion into new markets.
The best financial advisors are fiduciaries who take the time to understand your unique situation and help you make informed decisions. This can include optimizing tax strategies, diversifying investments, and creating contingency plans and insurance policies for you and your business. If you’d like more insights on my financial advice, learn about the consultations I offer.
As a woman, protecting your assets and best interests both professionally and personally requires careful planning, clear legal agreements, and proactive work. By ensuring a financial foundation, understanding your risks, and having the right people in your corner, you can safeguard your business and personal wealth, setting yourself up for long-term success.
Remember to seek advice from legal, financial, and insurance professionals you trust, who have experience working with women like you, and listen to your unique needs. You deserve to work with the best of them.
