Dangers to Personally Owning Your Sales Proceeds
Being a salesperson is a tough job; as the middleman, you subject yourself to many dangers. One such danger is consumers coming back and suing you for a defective product, an inadequate service, or even their personal dissatisfaction; personally owning your sales proceeds.
Consider the following scenario; you sell a product to a buyer and they happily accept the product. However, a few weeks later (or even months or years) – the buyer decides that they no longer need or want the product and come up with a ridiculous excuse to give it back to you for a refund. When you refuse, the buyer sues.
The best way to protect yourself in this scenario is to title the proceeds to a separate entity immediately after you have earned them. That way, even if the consumer sues – the proceeds are no longer in your possession and they will get nothing. Further, make sure the rest of your assets are protected simultaneously.
The following are some other ways to protect yourself in the event a consumer tries to sue claiming they aren’t happy with your products or services.
Agreements evidencing return policies and proper disclaimers.
A return policy is an essential must have for every business selling products or services. The return policy should be reasonable and protect you and your business concurrently. It is very important to have as much details regarding your return policy evident on any receipts or documents given to your clients. That way, when they come back years later unhappy – you can quickly and easily diffuse any issues by showing them that their claim is barred by the return policy, written on their receipt or invoice, which they accepted willfully. Make sure all of your disclaimers are legal, conspicuous and clear – so there can be no confusion later as to whether a client knew about a disclaimer regarding your product or service.
Protect all of your assets, not just your sale proceeds.
If a client does successfully sue you, they may attempt go after Attorney’s Fees and additional monies for damages beyond the sale proceeds. That is why it is important to protect ALL of your assets, not just the proceeds you receive from sales. The following are three of the most common Asset Protection techniques.
- Convert non-exempt assets into exempt assets. State laws protect some personal assets from lawsuits and creditors. Those assets typically include your primary residence; personal items such as furniture and clothing; pensions and retirement funds; and life insurance. Find out the exemptions for your state and convert non-exempt assets (i.e. cash) into exempt assets (i.e. life insurance).
- Protect your assets with liens. What is a $100,000 car worth if you owe $95,000? What is a $1 million house worth if you owe $950,000? Take out lines of credit. Record mortgages against your property. Make all of your assets valueless. Become an unattractive candidate for a lawsuit.
- Transfer your assets to a protective entity. The key to asset protection is to own nothing while controlling everything. Transfer any non-exempt assets out of your name to protective entities such as trusts, LLC’s (limited liability companies), limited partnerships, etc.
Please visit my website or contact me directly if you would like any more information regarding Asset Protection or Estate Planning, or would like a copy of my best-selling books on Asset Protection (complimentary if you mention this Blog).