Is Your Business Structured for the Future?
How has your business been set up and structured?
Is your business structured as a sole trader or have you set up a limited company, partnership or family trust. Many businesses started 10 or more years ago and are set up as a shelf company, with husband and wife as the only two shareholders. Husband and wife are probably also directors. This fine when you first start out because it’s quick, easy and cheap.
But over time the business grows, you purchase other assets such as equipment or real estate. Some companies buy the premises they operate out of. The real estate is held in the trading entity, along with a stake in another business or a significant piece of equipment. There is no separation of risk and assets. Part of preparing a business for sale is to minimise the risks with the right ownership structure. For many people asset protection means being able to control assets. Or it means access to assets which they do not actually own, so that if they are sued the assets are not at risk. Common examples are assets being owned by a family company or trust or being placed in the spouse’s name.
The key is separation.
Wherever possible quarantine the assets from the risk by creating completely separate structures. Especially capital appreciating assets like property. Where husband and wife are both directors, they are both at risk individually. We need to find a way to protect them too.
It’s not that the wrong structure has been set up, but that the business has changed over the years. It has increased in value and taken on assets and risks,. The original structure is no longer appropriate.
Another aspect of asset protection is having adequate insurance cover and good systems in place to prevent faulty goods, negligence or injury. We also look at where we want those assets to end up. Perhaps you want to keep the business premises and rent it to the new owners to create an ongoing income stream. If so, you won’t want it sitting in a trading entity, but more likely in a self-managed pension fund, trust or other structure.
At Succession Plus we work closely with you and your financial planner to get the most benefit from your assets.