PUBLISHED ON 13TH OF AUGUST 2018 – DYNAMIC BUSINESS ONLINE
When setting up a business, the founders must ensure that their business and / or personal assets are protected from any possible future financial setbacks, any disagreements within the business or family or from any business failure.
Assets can be protected in various ways, depending on whether these assets are tangible and intangible assets. Tangible assets, such as office furniture or fitout, can be protected by taking out a relevant insurance policy. In turn, intangible assets, such as designs, trademarks or patents, can be protected via a registration process.
INITIAL STRUCTURING AND EXIT STRATEGIES
Prior to starting any business, the appropriate structure must be chosen. There are a number of structures which can be utilised by business owners in Australia and the correct structure can ensure that the assets of the business owners are protected, personal liability is limited and they are able to stream business income to more than one individual. The most common structures used by business owners in Australia are corporate and trust structures.
Once the right structure is set up to operate the business, then a shareholders’ or partnership agreement must be put in place covering how each party can exit the business and how the business assets are to be split up in the future in case of death or illness of one of the parties.
In any business, various insurance policies should be taken out to protect all tangible assets of the business, which can be destroyed. Insurance can also protect the financial position of a business covering any business interruption or personal liability or other claims being made against the business.
Therefore, every business should take out public and product liability insurance, workers compensation insurance, business interruption and key person insurance. Such policies would minimise any potential strain on the business in the event of any unforeseen circumstances occurring including death of any of the founders.
Every business owner should have a valid and current will, which reflects the asset distribution and what happens to their share of the business in the event of death. The will should be updated as new assets or businesses are acquired. The will should also be updated upon a marriage taking place, as marriage nullifies any will put in place prior to it.
LEGAL AND FINANCIAL ADVICE
All business owners should ensure to obtain legal and financial advice to ensure asset ownership and business structure affords appropriate protections.