If you are planning to build, establish, grow and benefit from a small business, protecting your assets should be one of your primary considerations. Too many times you hear about people that have done brilliantly in business, only for something to go horribly wrong. Then you’re shocked to find them and their families enduring real financial hardship a little while later. How does this happen? How can business owners suffer such a dramatic and complete change of circumstances both commercially and personally? Protection or lack of it would be one answer – and an all too common one at that.
Oil and water, cigarette lighters and petrol, your hard-earned assets and commercial risks within or around your business. All of these combinations have potentially explosive and very damaging consequences. Lives can be altered forever, there can be a tonne of damage to people and property. However, the separation and safeguarding of assets from risks can be managed with the sound advice of a good accountant.
They would tell you, as I am now, that if the point of owning a small business is to help build a wonderful life for your family, then once you’ve accrued assets, they should be protected. Protected from economic peaks and troughs in world and local markets, supply and demand fluctuations in your own or even poor decision making by you or someone within your business.
One of the simplest ways to make sure that your family home, vehicles, sports memorabilia and other assets aren’t brought into play if your business hits trouble is by selecting the right business structure.
If your business is set up as a sole trader, you are personally liable for consequences that may not be of your own creation. A disgruntled employee, a careless oversight or even just plain old bad luck could put your personal assets directly in the punitive firing line. The same can often be said for partnerships, which can be trickier still because there will be at least two but often more people making decisions that may well effect your assets.
Keep in mind, we’re not talking about the bonus you were hoping to earn, dividends you wanted to distribute or even future earning capacity. The potential tragedy lurking in the shadows of these business structures is that owners and/or partners can lose what they already own.
Okay, so due diligence is exactly that – it’s a must, it’s something you have to do and this by itself will keep you safe from a lot of the troubles that can beset businesses of any size. But a great deal of help comes in the form of the in-built protections offered by business structures such as Trusts and Companies. Here you have structures that recognise you (and your assets) and the risks associated with your business’s commercial activities as almost mutually exclusive (with just a few exceptions to muddy the waters). All in all, far safer than betting the family home that you won’t ever put a foot wrong, nor your associates and that no one will ever come after your business with ill intentions.
At the end of the day, you have, or will have, worked very hard for what your family enjoys. It’s worth protecting and can be, with the right advice and decisive action. If you want to talk about keeping risks at a safe and respectful distance from your assets, talk to us – we want to help.
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