What Business Structures are Better at Protecting Assets?
If you are running a business and own some assets, you may or may not lose them based on how your business is structured. Making losses in your business or going bankrupt will bring you on the road but not always. Choosing the right structure can protect you in bad times and you can use those belongings to grow again from scratch.
Let’s understand different structures and know how far they can protect your assets.
- Sole Traders: Being the easiest to set up, sole tradership offers zero protection for your assets. In case of a lawsuit or bankruptcy, your family home will also be at risk.
- Partnership: If the partnership involves sole traders, the above applies to the assets. However, the legal features take on the other entity if you have partnered with one for the business.
- Company: Usually, a company is established as a separate entity and has a diverse list of assets attached to the name. In case of legal action, the assets belonging to the company fall under the scanner. This protects the personal assets of the shareholders, hence sighing relief.
- Discretionary Trust: This structure gives you (the business owner) the benefits of owning a company while giving you the rights of a trading entity. This will protect your business from legal action but won’t protect you as a person.
- Unit Trust: Similar to a discretionary trust, a unit trust gives the advantage of separate units being up for any legal action. This means you might lose a particular section of your business instead of the whole company.
For the best advice on the right structure and strategy, you should deal with a professional Toongabbie accountant.