Directors and Business Owners: Are you exposing your family home to risk?

Most directors and business owners would understand that if creditors, clients or employees take legal action against their business, the assets and wealth of the business are at risk.

What they may not be aware of is that often their personal assets and those of their family, such as the family home or personal investments, are also at risk of being lost to satisfy the claims of the prosecutors.

You can go to a lot of effort to build your wealth, then something comes up and it seems that overnight, it’s gone.

It can happen and has happened to others.

So, how can you prevent it happening to you?

First, make sure you understand these facts:

    • Every business interaction gives potential to be sued by the other parties involved – whether your creditor, client or employee.
    • Australia is considered to be a very litigious nation and the rise in lawyers offering ‘no win, no fee’ services has resulted in more people initiating legal action because they have nothing to lose if it fails.
    • To properly protect your personal assets, you need to build an impenetrable ‘wall’ between them and your business risks, which litigants cannot reach over.

Then take steps to build your ‘wall’ and maintain it:

    • Review the structure of your business and use companies and trusts to create a boundary between the trading business which has the interactions and the key assets of the business.
    • Consider who holds director or trustee positions and who guarantees the loans of the business, as these are relationships that can be pursued by prosecutors.
    • Take a close look at your will and how assets would be controlled in the event of your incapacity, or distributed in the event of your death, as some changes to ownership or control could introduce exposure to the business risks.

The Australian Institute of Company Directors discusses some particular ways you can protect your assets in their article “Safeguarding your Personal Assets”.

You should review your asset protection structure every 12 months, so that your ‘wall’ remains strong enough to protect your assets as your life changes.  The cost of doing so is likely to be a minor consideration when compared to the protection they can assure for you and your family.

Call us on 03 5339 3200 or request a meeting to discuss your Asset Protection Plan options and costs.

Thanks for reading.

By Genna Kidd

The information contained on this website has been provided as general advice only.  The contents have been prepared without taking account of your personal objectives, financial situation or needs.  You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

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