You already know that starting a business is risky. Building a company that attracts reliable customers, talent and steady profits can take months or years.

But how much have you thought about protecting your personal wealth?

Nearly 75% of small business owners use personal savings to fund their companies. That’s money that could otherwise go to retirement, college savings or other personal goals. However, you will also face significant business liability risks that could pose even greater threats to your personal wealth.

Parallel planning for your financial future as well as your company’s is important for another reason. Research shows that only 20-30% of small businesses eventually placed on the market will actually sell.

So, work hard to build your business, but remember to put yourself first. Here are five basic ways new business owners can build and protect their wealth.

1. Evaluate Your Personal and Business Finances Early

When’s the best time to prepare your personal finances for business ownership? Optimally, before you open your business. That said, it’s never too late to consider—or reconsider—your personal wealth goals no matter how long you’ve been in business.

Consider reaching out to qualified, professional advisors who can help as part of your initial or ongoing business development process. They can help you determine:

  • How well your personal finances can withstand startup costs.
  • Whether your new or continuing business plan is positioned not only for growth, but for potential risks related to your industry, location or other factors.
  • If emerging risks (legal, tax, regulatory or technological) can be lessened with new strategies or specific insurance solutions.

2. Select the Right Legal Entity

Choosing the wrong business structure can potentially drain your personal assets if you face a lawsuit or creditor claims. It makes sense to get qualified advice on which of the following U.S. business classifications will best protect your company from an operating and risk perspective:

  • Sole proprietorships offer the most simplicity at startup—you’ll track all income and spending and simply file a 1040 like any other individual taxpayer. However, you’ll be personally responsible for all legal claims and debts against your business, including those for employees if you have them.
  • Limited Liability Company (LLC)status can help shield you and your shareholders from business claims with only business assets at risk if you can’t meet those obligations.
  • C-Corporations generally provide the most comprehensive legal protection for owners against business liabilities and obligations. But expect complexity and cost. C-corporations, or c-corps, take on extensive tax, governance and operating responsibilities based on state and federal laws. Typically, most small businesses don’t start out as c-corps.
  • S Corporations, or s-corps, can help your business if you want the liability protections of a c-corp but want to bypass its double taxation and many of its administrative requirements. However, you will have to file initially as a c-corp to convert to an an s-corp.
  • Partnerships divide business ownership between a number of individuals. Equal, full partners bear their full share of any business liability unless they shift to a more complex partnership structure to limit liability.

Keep in mind that your business entity might need to change over time based on personal or business goals. Also, it’s not unusual for small businesses to “layer” several entities to protect certain business and personal assets. In short, evaluate your entity status regularly with qualified advisors as needed.

3. Get Proper Business Insurance

Once you settle on one (or more) business structures, you’ll likely need some level of insurance protection to protect all that you’ve invested into your business. With the right types of insurance coverage, you can have peace of mind knowing that you won’t have to pay claims out of your own pocket. It’s a good idea to meet with one or more experienced business insurers, agents or brokers who can help identify your specific risks and coverage options. Consider asking:

4. Keep Your Business and Personal Records Separate

The most common advice new business owners receive is to keep your business bank accounts separate from your personal ones. If you’re already doing this, then you’re one step ahead. That’s always a good starting place once you’ve selected your business structure and registered it. Then you can consider:

  • Placing your full business name including your entity (see above), on all company documents, including invoices, proposals, leases, supplier agreements or employment contracts.
  • Applying for a business credit card to track business expenses and also build your business’ credit performance for future borrowing.
  • Creating a records system to make sure you meet key requirements you’re your business entity deadlines required by your business entity.
  • Working with a qualified advisor who can help you align your personal wealth and business goals for the life of your company.

5. Make a Disaster Recovery Plan

Businesses of all sizes make emergency plans to avoid business interruption and recovery costs.  Even solo businesses need to plan around potential scenarios that could stop operations and slow income. Consider scenarios like a recession, data breach or a natural disaster. Be sure to outline the specific actions you should take to respond to these emergencies and get you back on track as quickly as possible.

In general, this disaster recovery plan should include: 

  • Regularly updated lists of professional contacts (former employers, industry colleagues) to provide new clients–or a full-time job if you need one.
  • Potential revenue streams, such as consulting work or passive income sources to support you and your family during lean times for the business.
  • Location and access to emergency funds, insurance coverages or other business resources if you are forced to shut down temporarily or long- term.

And a final point. Make sure all emergency documents you prioritize are safely stored (either offsite or digitally) so they can be accessed quickly.

Running a business can easily absorb most of your time. However, it shouldn’t absorb your financial future. Consider making personal wealth planning an early priority in any new or continuing business plan.