Posted on: 13 September 2021
Many Australians have decided to opt out of the rat race and take care of their immediate future themselves. They may swap a salary for self-employed freedom and launch a product or service instead. This can be a very attractive proposition, but peril can wait for those who have amassed a number of valuable assets during their lifetimes. If you find yourself in this position, why do you need to pay particular attention to your new business structure?
Looking at the Options
As you undoubtedly know, there are many ways to set up a business. You can do so as a sole trader or in partnership with another sole trader. You can establish a corporation and become a director instead.
Yet, if you want to protect any significant assets that you may own personally or as part of your family, you need to be careful. If something were to go wrong in the business and you were to be sued, the other party may get access to those assets. After all, the sole trader is responsible for the business's operation, which means that their personal assets could be exposed to a large degree.
Partnerships offer a little extra protection, but not that much. Again, both you and your partner are responsible for the conduct of the business and remain quite vulnerable.
If you insist on a partnership approach, set up a limited company on your side and make sure that this new company enters into the partnership agreement with the other party. You will get some degree of protection over your personal assets.
It's best, however, if you set up a company or a trust of some kind. Creditors will find it very difficult to pursue your personal assets as you are not legally liable for the business, per se. You will need to make sure that you always make careful and shrewd decisions when you operate the business and cannot be accused of negligence. It is always best to take out liability insurance in any case.
Getting Professional Help
It is difficult to completely ring-fence your personal assets when you are a business owner of any kind. It is undoubtedly easier if you protect yourself through a corporate structure and by taking other measures.
Of course, you want to make sure that you do this properly and should engage a business lawyer at the outset. They will make sure that you set up your organisation correctly and give you advice about your future plans.Share