1. Generally speaking, personal assets such as our home and the contents we own are insured. Furthermore around 60% of self employed persons ensure they own tax deductible income insurance that pays them up to 75% of their income in the event of not being able to work as a result of an accident or a sickness.
2. Many business owners have their superannuation in a self managed super fund and ensure they make the maximum deductible contribution each year. This is on the basis to not only ensure the nest egg at retirement is sufficient to live on, but it is also on the basis that it is a very good asset protection strategy as creditors cannot come after one’s superannuation as easily as they can with NON superannuation assets.
3. An owner or director of a business has significant risk that can also be mitigated with directors’ and officers’ liability insurance, ensuring the company has public liability insurances and, if appropriate, it also carries professional indemnity or has product liability insurances in place.
4. The most common and simple strategy that protects owners is to hold the business in the right asset structure, whether it be an unlisted public company, proprietary limited company, family trust structure or even through a partnership. Directors and owners need to understand the differences and ensure each business asset is held correctly.
10 Simple Tips
- Use an insurance broker to recommend the right insurances for your business.
- If you are not covered by Workcover ensure you hold adequate Income protection insurance.
- Engage a finance broker to get the most effective lending solution on vehicle, equipment, residential and commercial finance (why deal with one bank when you can have access to all of them?).
- Review cash flow on a monthly basis against budgets, and corresponding periods to detect any early warning signs of a downturn.
- Make sure the type of superannuation you have suits your investment needs and can meet the retirement expectations you have (i.e. SMSF, Wrap account, Master fund, retail fund, Industry fund etc).
- Don’t let creditors blow out (a business in distress often relies upon using someone else’s credit).
- Avoid signing personal director’s guarantees on finance when it is not necessary in most cases (a finance broker who is independent to the lender can advise what level of guarantees is commercially mandatory and what is not).
- Consider outsourcing some of the business functions that you need to provide but don’t generate a satisfactory return on equity, staff resources or your time.
- Self education is valuable; one course that is ideal for a business owner/ company director is the course offered by the Institute of Company Directors to understand the risks of running a business (http://aicd.companydirectors.com.au).
- Talk to your accountant if you are not sure about something … Yes we are here to help and only a phone call away.
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Disclaimer
The information in this article is of a general nature only and should not to be taken as a recommendation as it might be unsuited to your specific circumstances. The contents herein do not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions.
BND Financial Pty Ltd and InterPrac FP directors and advisers may have investments in any of the products discussed in this article or may earn commissions if InterPrac clients invest or utilise and any services featured. Your InterPrac FP adviser or other professional advisers should be consulted prior to acting on this information. This disclaimer is intended to exclude any liability for loss as a result of acting on the information or opinions expressed.
