Individuals running a business as a sole trader or in partnership are exposed to personal liability. It is also common for directors of companies to be signing personal guarantees when entering into a commercial transaction such as leases and purchasing goods from suppliers. This exposes directors to personal liability also.
Protecting your personal assets
Even if you are not operating a business in any capacity, if you hold valuable assets, those assets are at risk in the event that anyone demands money from you. This can stem from various situations from bad business operations to an unfortunate car accident. Any assets in your personal name such as your family home or your car may be used to pay your creditors.
Protecting your company’s assets
If you are running your business via a company structure (eg a Pty Ltd structure) your company will most likely hold many valuable assets such as real property or a lease, intellectual property, good will and equipment. If the trading entity (i.e. the entity running the everyday operation of the business) and the entity that holds these assets are the same, you may risk losing these assets to your creditors or anyone with a claim, for example due to an accident or arising from faults by the manufacturer of the products you sell.
It is important to protect your assets whether you are an individual, a company, or any other entity. Implementing an asset protection structure in place will not only stop creditors from reaching into your pocket and can also deter them to take legal action.
How Prime Lawyers can help you
Asset protection can be achieved in several different ways and it is important to speak to a lawyer and in many cases an accountant to ensure that we choose the right structure for you. Some of the factors that will need to be considered are:
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The Value of the assets to protect.
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Industry of business that you are in (and the level of risk associated with it).
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Administration and other ongoing costs associated with each structure.
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Your future plans
Our commercial lawyers can assist you in setting up the appropriate structure for you. We can also draft agreements such as license agreements or a lease between the trading entity and the entity holding the assets (if necessary) and loan agreements.
If you are considering how to best protect your assets, you may also wish to read some of the following pages:
Feel free to call one of our commercial lawyers now on (02) 9521 2222. You can also send your enquiry online now and we will call you shortly.