Let's kick in an open door: Entrepreneurship is about taking risks. As a self-employed person, you have a lot less security than an employee. For example, what if you become ill, what about your financial situation once you wish to retire... A lot of entrepreneurs admit that they have too little knowledge about their future income in these situations. But what steps can you take to create the necessary financial peace of mind for yourself?
1 Declaration of unseizability of own home
As a self-employed person, you are personally liable for all debts incurred during the activity. A first asset protection concerns a technique that is still too little known and applied. Indeed, any self-employed person can take out the having your own home protected against most of the debts accumulated during self-employment. So this can be for merchants, liberal professionals to company directors.
This protection is enjoyed from the moment a declaration is made before the notary. All new debts from the time this declaration is made are therefore shielded and creditors cannot enforce the self-employed person's own home. Some debts such as tax debts obviously do not fall within this limit.
2 Guaranteed income
Protecting your own home is a good start but in the event of disability it will bring little relief.
To compensate for a loss of income during self-employment, it is advisable to take out guaranteed income insurance. In addition to the (limited) reimbursement you receive from the health insurance fund, an additional reimbursement can be enjoyed in order to enjoy a monthly income.
How high the protection should be is up to you but, of course, should take into account your current income. An added advantage is that the premiums are tax deductible. Taking out such insurance does require a health examination in most cases.
3 Manager's insurance
If you are the manager of a corporation, it is recommended that you take out the previous two protections. Like the self-employed person through guaranteed income insurance, the partnership can also protect its income. Through a business manager insurance or Keyman insurance can ensure the financial continuity and stability of your business as a self-employed person.
This policy insures up to 80% of the company's turnover. If you would no longer be able to carry on the business - due to incapacity - the company will receive an interest to continue paying the fixed costs (rent, staff...). Upon death, the company will receive a capital that can be used, for example, to pay off one or more investment loans, or to hire a new manager.
So this insurance is often taken out by sole proprietorships or by SMEs where one person plays a central role (Keyman). Indeed, the loss of this person can have a drastic impact to the fortunes of the company. Taking out this insurance will also require a health examination.
4 PSPS and IPT
Every self-employed person has their own ways of building up a pension. One of the most well-known systems is to build up additional pension capital. As a self-employed person, this can be done by taking out a PSPS. This final capital is taxed favorably and is often the first step taken. Like the premiums guaranteed income, these premiums are also tax deductible. Note here, however: often the VAPZ premiums also include guaranteed income protection. So don't pay twice for the same protection.
In addition, additional capital can then be built up through the company by initiating an individual pension commitment (IPT). These premiums are also tax deductible, within the limits of the 80% limit. However, Minister Van Peteghem wants to thoroughly modify this principle in his planned tax reform.
Of course, there are many elements that are out of your control when assessing your financial situation. Just think about inflation, the impact of the war in Ukraine, your own health... But still, it is important to think in time about what financial resources you have and how you can ensure the necessary financial protection.
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