What’s the number one thing you need to think about when setting up your business with structure in mind?
Surprisingly, it’s not about tax. That’s number two.
The first thing you need to understand is asset protection. To help out, I have a couple of simple tips to remember when you’re setting up your structures for business.
Put your family home in the non-working person’s name.
Firstly, if you own a family home, put this in the non-working person’s name within that business. This is crucial for eliminating risk.
Hopefully, if you’ve got a decent home, it will be growing in value. We don’t want that growing asset to go down if the business goes down. Put it in the non-working person’s name.
Don’t worry folks – if your marriage or partnership goes down, the family court overrides everything. You don’t have to get nervous if the person sleeping next to you owns that two million dollar mansion. The family court will not care that that person owns the big house.
Make the working person the director.
Secondly, you need to address the director on your companies of trusts. The director needs to be the working person in the relationship. This is because, in this day and age, directors are taking on more and more risk.
Notably, the directors of companies running businesses are personally liable for PAYG withholding tax. This includes their employee’s tax and their employee’s superannuation. When you take on this responsibility, you are also taking on responsibility of key suppliers, deposits on commercial rent, and a number of other things.
The director of the company takes this risk.
Be ready for if things go pear shaped.
Structuring your business for asset protection is not difficult when you have advice from a quality small business accountant.
Two of the most important steps are ensuring the property you own is in the non-working person’s name, and ensuring the director on your company’s running trusts is the working person.
Asset protection is vital, because you have no idea what troubles your small business could run into down the line. Being conscious of risk is the number one thing to remember when you’re setting up your small business from a structural viewpoint.
Need more information? Our team of tax champions are always ready to assist.