Limit Your Liability
Playing it safe is the essence of moonlighting. While you should be prudent about hanging onto your job, through zeal or experience you can become ensnared in unacceptable obligations. You might wake up to realize you're risking more money in the venture than was ever intended. And, more often than not, you will find all of your assets in jeopardy.
In medieval England, people were constantly at risk from foreign invaders and bandits who would swoop down and ravage everything in sight. To protect against these raids, the inhabitants built stone towers. When threatened, they would retreat into these fortress-like shelters where they could hole up and protect their lives, if nothing else. These towers still remain as evidence of how those resourceful people defended themselves against surprise attacks.
You can build a tower to insulate yourself from unacceptable liabilities. Start your moonlighting with a predetermined maximum amount of money that you are willing to lose, and vow never to be at risk for an aggregate amount which exceeds this sum.
The first step in preparing your defense is to identify each potential enemy. Once you have identified these threats, you can build an effective structure, block by block, to protect your financial integrity. The moonlighters entire net worth can become exposed to risk by the following:
* Personal guarantees
* A long-term lease
* Working capital needs that exceed start-up limits
* Personal liability for business-related lawsuits
* Excessive inventories
* Slow-pay or bad receivables
* Uninsured losses
Keep in mind that a direct hit in any of these areas can precipitate a hemorrhage of dollars. When this happens, your financial net worth is going to bleed until there's not a drop left. Not a single exception can be permitted in adhering to the following safeguards. The idea is to isolate certain assets from risk principally your job, but also that part of your net worth you wish to leave at home rather than bring to the entrepreneurial gaming table.
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