Usually individuals in business either operate as a sole trader, a partnership, establish a company, or a company/trust without consideration to the owner’s personal assets that remain at risk. The most important aspect in structuring is asset protection; to separate as far as possible, the risk bearing activities from asset owning entities. This activity should be reviewed at least annually, because as your business and personal life changes, it may be appropriate to change your structure.
Protecting your assets is about using permissible techniques to ensure that your assets are secure should something unexpected happen. It is not about hiding assets or acting unethically, it’s about facing the facts that in Australia, we are considered to be one of the most litigious nations in the world.
Structure is important, not only in terms of the “business vehicle” that you create when you incorporate your new company, or buy a business or asset, and equally important is having a valid Will and even an Enduring Power of Attorney. A Power of Attorney is a legal document in which you appoint another to manage your assets and financial affairs while you are still alive. An Enduring Power of Attorney can be useful if you become unwell and are no longer able to manage your affairs, this scenario is far more common, for someone to become incapacitated through accident or trauma, than to suddenly die. For example, having a stroke is the second biggest cause of disability in Australia. It can happen to anyone, at any time.