Asset Protection: Wealth, Family Assets, and How to Keep Them
We all aim to build thriving, profitable businesses, but the reality is that sometimes things just don’t go our way. So if the proverbial waste matter hits the proverbial fan, you may not be willing to sacrifice the personal assets that you and your family have already worked so hard for.
If protecting your existing wealth is a priority for you, then read on! In this article we’ll explore strategies that can help protect your prized belongings in the worst case scenario, so if the unspeakable happens, you can get right back on that business horse (riding into the sunset optional).
Good risk mitigation truly takes a many-pronged approach. Here are my top 4 asset protection strategies:
1. Choose a business structure that protects your assets
As we discussed in Limited Liability 101, protecting your personal assets starts with choosing the right structure for your business. A partnership or sole trader may not be the best option if your priority is to protect your wealth. A company, or a trust, may be a better fit in this case.
Clients often seek my advice on their business structure options, and one of the first things I’ll ask is: “what end do you have in mind?”. What are you aiming to achieve with this business? Is it a side hustle dream, a “replace your corporate income” dream, or a change the world dream?
Here’s the big secret: Once we have clarity on your vision, then we can look to business structure as a vehicle to help achieve it.
And a not-so-well-kept secret: If you want to demystify the whole “business structure” thing and get a sound understanding of what your options are in under 60 minutes, check out my masterclass Business Structure: What You Need To Know, which does exactly what it says on the box.
Will a limited liability company protect my family assets in the event of a business failure?
By the time they come to me, many of my clients are in the midst of uplevelling. What’s important at this point is making sure that their business structure will contribute to protecting their impact and their legacy.
A limited liability structure can help protect your personal assets by managing your risk, but it isn’t the only potential structure if asset protection is your priority. Business structure alone won’t keep you completely safe—it’s just one piece of the puzzle.
The short answer is yes, a limited liability company structure can protect your personal assets if something goes wrong, but it’s important to tick some other boxes in order to truly manage your risk. So… definitely keep reading.
2. Insurance matters
Insurance is absolutely crucial for protecting your assets (and, you know, everything else).
But—and this is really important—it needs to be the right insurance for your business. Some industries are more subject to certain events than others, and your business will have unique needs.
But here’s the good part: figuring out the right insurance means that you need to understand the potential risks you may face. And when you have clarity around your risk areas, you’re also more empowered to make better business decisions.
How does the right insurance protect your personal assets? By protecting your business in the first place. It means (among other things) that if something goes wrong, rather than having the resulting costs sink your business, you have a way to keep going. Prevention really is better than cure!
3. Keep it compliant
It’s important to appreciate, too, that you NEED to be aware of your duties under the Corporations Act (2001) (Cth) if you are going to be the director of a company.
If you’re not aware of these duties, and you breach them, ignorance or lack of knowledge won’t hold weight as a defence, and you’ll risk losing a lot more than your assets. Getting clear on your obligations is more than a non-negotiable: it’s a power-move that gives you real confidence in running your business.
4. Enlist the experts
Save the DIY for something that doesn’t involve your livelihood and assets, and talk to a small business consultant to ensure you’re compliant and your stuff is protected.
What about this expert? Book a free chat.
We also recommend our Legal Advice for Small Business l Ultimate Guide as a helpful resource you’ll want to keep close.
