Starting your very own business is both exciting and challenging, legally, professionally, and personally. As the owner of a new business, you need to separate your personal liabilities and assets from your business. The problem is that sometimes the lines between your business and personal lives might be vague that separating them might be difficult. Here’s how you can avoid overlapping the two to ensure that you achieve your business goals and safeguard your personal assets as well:
Choose the Most Suitable Business Structure
Generally, you can choose from four common business structures including sole trader, trust, company, and partnership. Seek the help of one of the top business solicitors in Townsville. While you need to take into account various tax-planning considerations, choosing a partnership or sole trader structure won’t give you the best asset protection; unless that is you take part in a partnership via a company or some other business entity. That being said, in general, you need to select a business structure that can provide you with limited liability, like a trust or company. You can even consider utilising both to ensure clearer separation and extra security.
Make Sure You’re Properly Insured
If you’re the director of your company, you need to have directors and officers insurance (D&O) and have an officer protection deed, also called indemnity deed, with appropriate companies. You must have a professional indemnity insurance plan while you’re in business and for seven more years after you leave your business. Additionally, it’s a great idea to have umbrella liability insurance that works to cover other kinds of insurance policies you might have.
Contribute to a Superannuation Fund
Ensure that you’re a member of a superannuation fund, commonly called super, and create a superannuation contributions pattern by making non-concessional and concessional contributions. When you maximise your superannuation contributions, you also reduce the risk of exposing your assets to creditors and increase related tax benefits.
Safeguard Your IP
Your intellectual property (IP) is one of the most valuable business assets. You might have owned your IP personally when you were starting out with your business, but make sure that you have properly assigned it to your business through an assignment agreement. Although owning your IP is ideal, it can put your IP at risk in the event that some files a claim against you. With this in mind, consider insulating your IP from your daily business activities by assigning it to a holding company, provided that your business structure is a dual company.
Transfer Your Assets to Your Family Members
As a business owner, you can protect your assets by transferring them to your family members. This works because potential creditors won’t have a claim against your assets since a family member, and not you, technically owns them. Note, though, that this move might result in duty or tax complications, so do your due diligence before you transfer assets.
Safeguarding your business and personal assets is vital, but asset protection strategies won’t work unless you implement them prior to any liabilities or claims arising. Therefore, keep the above-mentioned strategies in mind and establish a plan to safeguard your personal wealth before it’s too late.