Asset protection strategies for growing business owners

Asset protection is about making sure that if something goes wrong in the business, it does not take everything else with it. Done early and for genuine reasons, it is a normal part of running a business.

Separate trading from owning

The entity that trades, employs staff and signs contracts carries the risk. Keep what it owns to a minimum. Property, equipment and surplus cash can sit in other entities.

Use trusts with corporate trustees

A family trust holds assets for the family rather than in any one person's name. Using a company as trustee limits the trustee's own liability.

Move surplus profit regularly

Cash left in the trading company is exposed to its creditors. Moving it up to a holding entity regularly helps, but it must be done properly so that Division 7A and other tax rules are met, and the money must not simply be lent back to the trading company.

Timing matters

Moving assets when a claim is already on the horizon can be undone: transfers can be clawed back under the Bankruptcy Act and the Corporations Act's voidable transaction rules, and family law can reach trust assets. Protection put in place early, for genuine reasons, while things are going well, is far stronger.

Plan for succession too

Control of a trust passes under its deed, not your will (although some deeds let you nominate the next appointor in your will). Check who the appointor and trustee will be, and coordinate with your lawyer on wills, binding super nominations and buy-sell agreements.

This is general information, not advice for your situation. We are not a financial services licensee; where insurance or financial products are involved we refer you to licensed advisers.