You have to do more than just generate revenue and manage operations when it comes to running a successful business. An important part of owning a business is protecting your assets. If you don’t have an effective asset protection strategy, you can risk losing your wealth to unforeseen financial difficulties, lawsuits and creditors.
When choosing asset protection strategies Australia, you need to look for ways to structure your assets so that exposure to potential legal trouble is minimised. You need to have financial, legal and operational measures in place to reduce your risk. You can form limited liability entities like limited liability companies or corporations so that your personal and business assets can be separated. Depending on the entity type, you can also enjoy significant tax benefits. The credibility of your business will also be improved when you operate under an LLC or a corporation. Make sure to have proper insurance coverage. This can protect you against different risks. For example, with general liability insurance, you will be able to cover legal costs and damages if your business is sued for property damage or injury. You can protect against claims of malpractice or negligence with professional liability insurance. Property insurance is there to cover damage to your business property from theft, fire or natural disasters. If your employees sustain injuries on the job, you will need to have worker’s compensation insurance.
It is important to separate your personal and business assets.
If these are not separated, your personal assets can be exposed to business liabilities. The reverse of this can also happen. You can therefore maintain spate bank accounts for personal and business finances. You need to have proper documentation when it comes to business transactions. High value assets like intellectual property or real estate should be places in separate entities. Trusts are another way to protect your personal and business assets. You can transfer assets into a trust and this will place them out of your direct ownership. This makes it more difficult for creditors to access them. There are revocable trusts where you will have control and flexibility over the assets. But this will have limited protection from creditors.
For stronger protection from creditors, you can look into irrevocable trusts.
But this will not be under your control anymore. You can be a beneficiary in domestic asset protection trusts and this will also offer you significant protection from creditors. In some states, there are homestead exemptions where a portion of your primary residence value is protected from creditors. You will need to check state laws for this. Some retirement accounts will also protect you from creditors. You will also be provided with immediate tax benefits when you contribute to retirement accounts. There are changes to laws with time so you will need to have regular reviews with financial and legal professionals to ensure the effectiveness of your asset protection plan. You can have annual check-ins with the accountant and your attorney. You have to keep updated with changes to laws so that you can modify your strategies from time to time. These modifications can also occur due to changes in your personal situation or business.
