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As a business owner, one of the most important aspects of your plan to consider is asset protection. By implementing a sound strategy you not only protect your business’s assets, but your personal assets too. Below are our top five tips to ensure your assets are secure and you are set up for long-term success:  

1. Business Structure

It’s important to have a thorough understanding of the different types of business structures available before setting up your business. 

In Australia, there are four types of business structures: sole trader, partnership, company and trust. Each type carries different obligations and liabilities which can greatly impact the security of your assets. A company, for example, is one of the best options for secure assets as it is a separate legal entity. This means that the company itself owns the business assets and not the directors or shareholders. Therefore, a company can sue or be sued but the shareholders have limited liability (to the value of their investment).

2. Understand Your Business and Tax Obligations

Particularly under the structure of a company, it’s critical to understand and fulfil your responsibilities. In serious circumstances, company directors may be made personally liable for a company if they have failed to meet their obligations. For example, in Australia, if a company has neglected to report on and pay its tax and superannuation contributions on time, the Australian Tax Office (ATO) may issue a Director Penalty Notice (DPN); making the director personally liable for repaying the debt.

Meeting your obligations doesn’t just protect your personal assets, it protects your business’s assets too. Another form of debt recovery used by the ATO is a Garnishee Notice. This legal order affords the ATO the ability to recover debts directly from any bank holding money for, or any debtor owing money to the business. By ensuring all your business’s taxes are paid on time, you avoid the risk of having money and assets stripped away.

3. Protect Your Corporate Veil

The ‘corporate veil’ is a term and legal concept used to describe the liability protection afforded to businesses operating under the structure of a company. The corporate veil is not impenetrable; if a company is found to have carried out misconduct, failed to keep personal and company assets separate or failed to follow corporate formalities, a court may ‘lift’ the corporate veil; rendering shareholders and directors liable. Therefore, by protecting your corporate veil, you protect your business and personal assets, too.

You can protect your corporate veil by:

  • Keeping separate bank accounts for personal and business use
  • Ensuring all transactions made by the company are in the company’s name
  • Meeting corporate formalities (for example, holding shareholder meetings and recording minutes)
  • Not engaging in insolvent trading

4. Insurance

Insurance is another essential form of asset protection for all individuals and businesses. Ensuring you have all the appropriate types and level of cover is the best way to protect your assets. Examples of the types of insurances required for businesses include:

  • Public Liability
    Public liability insurance provides cover for businesses in the event that a client or member of the public makes a claim against the business for personal injury or property damage caused as a result of negligent trading.

  • Professional Indemnity Insurance
    Professional indemnity insurance is designed for businesses that provide advice or a service and protects them from situations such as contract breaches, copyright infringements or mistakes resulting in a client’s financial loss or defamation.

  • Worker’s Compensation

This type of insurance is a legal requirement for most businesses operating in New South Wales. It covers the cost of support and treatment for employees who suffer from a work-related injury.

5. Copyrights and Patents

The intellectual property of your business not only encompasses its brand and image, but its ideas and products, too. These are some of the most valuable assets of your business, so it’s essential they are properly protected. Make sure you attain all the appropriate trademarks, copyrights and patents to protect your intellectual property.

Our team at Wisdom Business Consultants are experienced in providing personal and business asset protection. We can help create an effective plan to prepare for any future challenges or threats you may face. To get started, contact us here today!

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