"Lock it or Lose it” – The Importance of Asset Protection for Business Owners
Owning a business is extremely rewarding, but it’s not without risk. Learn how to mitigate those risks with appropriate assets protection structures.
Owning a business is extremely rewarding, but it’s not without risk.
If you own a business, it’s almost inevitable that you will have incurred business debts. Sole traders, partners (i.e people in partnership with others) and directors of companies, will be personally liability for the running of their businesses. If your marriage/relationship ends, the business you own may become part of a relationship property settlement.
So what can you do to minimise these risks? What can you do to protect the stuff you own from marauding creditors, angry clients or money hungry exes?
The obvious answers are: Pay your bills; do a great job; and remember that that particular contract was “for better or for worse”. But of course, life is never straightforward, which is why it’s always good to have a back up plan.
This is where Trusts and Relationship Property Agreements can help. These asset protection structures are like a fence at the top of the cliff, rather than an ambulance at the bottom.
To be successful it is extremely important that Trusts and Relationship Property Agreements are put in place before things take a turn for the worse.
If the courts believe you are transferring assets into trusts with the sole purpose of defeating a creditor’s or spouse/de facto partner’s interest, the protection will be lost.
Likewise, as soon as you are married or have been in a relationship for more than 3 years, the equal sharing provisions of the Property (Relationships) Act apply to your relationship and your spouse/de facto partner could walk away with 50% of the assets you own (including your business) if your relationship ends.
By putting these asset protection structures in place before you need them, you afford yourself the best protection. Think of them as insurance policies; just in case.
If you have any questions or if you need any specific legal advice in relation to business, property, family or trust law, please contact Richard Williams
The content of this article is necessarily general and readers should seek specific advice on particular matters and not rely solely on this article.