Protect Your Assets (part two)
In our last newsletter, we visited the issue of protecting your assets and started to discuss some of the ‘ownership’ options such as companies or trusts.
Many businesses operate via a company. Some people with large amounts of business assets even use a separate company (or other entity) to own the assets to keep them separate from the business affairs and its risks.
Many people believe using a company is sufficient and we’ve often heard of people saying they are protected because they have a “$2” or a ‘shelf company’, or their company has limited liability, or that it’s fine because they only have one Director.
Unfortunately, in the legalities of finances and taxation, the devil is often in the detail. Consider the following three examples:
- One of the first things many companies do when they go into business is to establish accounts with suppliers. Many suppliers and landlords require an ‘account application’ to be completed before buying items onThese often include a clause that holds the Director, or person signing the application, personally liable for any unpaid account. Make sure that you read these carefully before signing.
- Over time successful businesses build up assets, vehicles, equipment, debtors, stock andWhist the “company” may only have a share capital of $2 which was used to set it up they also have significant value in the assets of the business that could be available to other parties in the event of a claim.
- Finally the Corporations Law in certain circumstances can hold a director to be personally liable for the actions of theThis may include allowing trade to continue when the business does not have the Cashflow to meet its debts or generally making poor financial decision made.
The definition of Directors has also been expanded. Therefore a person who has strong influence in decision making may in fact be held as the Director.
As we commented in our last newsletter, if you are worried about your situation, which assets you could lose, or are unsure if you are ‘safe’, please do not hesitate and contact us for a review of your asset protection strategy.
Remember, we are here to help.