Magnitude of asset protection – Is it really required in a volatile economy?

Posted: November 9, 2011 in Business, Business Financing, Finance

If you’re a business owner, it’s a pre-requisite for you to identify the most appropriate structure through which you may run your business successfully. No what do you mean by an appropriate structure for your business organization? Well, an appropriate structure is that which will not only offer you taxation benefits but also provide your business with enough flexibility and safeguard it from the most common business risks. In the present volatile economy, this move by all business organizations is more important than ever. Failure to protect your assets may make you run into the risk of incurring business debts and require running to business debt consolidation non-profit companies for financial help. But will you benefit by getting in touch with them or will it be just a waste of time?

Well, the debt relief companies are all there to assist you in getting out of business debts and re- establishing a firm footing in the market, but is it not always better to stay safe than sorry? You bet it is. An effective business structure does not always need to be complex but rather requires enough consideration of the present and future needs of the business organization.

Considerations of asset protection and its importance to a business

The increasingly litigious economic environment in the US makes asset protection a mandatory consideration for all business owners who are keen on staying afloat. A business organization might be at the risk of being sued by its customers, suppliers, employees and even by the regulatory bodies for breach of law. This is the reason why the business structure that you choose must provide high level of protection of your personal financial assets of the company. Does this mean that the personal assets of the business owner are not at risk of being sued? Yes, it is not at risk unless the company is proven to be trading while being insolvent. During such a situation, the Director’s personal assets may also be at risk.

Using a Trust structure to operate a business can be a good asset management strategy that you can adopt. Through a Trust structure, the assets of the business will be separated from that of the individual and this will enhance asset protection of the company as a whole. The Trust is not a separate entity but the business operations will be held in the name of the trustee. However, a note of caution is always given by the asset management experts that you must ensure that the personal assets are held separately from the business. When the business underperforms your personal assets may be at risk and this can only be avoided by effective business structure.

Often there are business owners who do not have a perfect Will in place or have a Will that was drafted ages ago. Such Wills that were drafted ages ago usually do not reflect the present asset holdings and the financial circumstances. When a Will is appropriately crafted, it will provide effective asset protection for your family by ensuring that the assets are equally distributed among your beneficiaries of choice, in the event of your death.

There may be some other structures like operating your business in your own name as the only trader of the company or through a partnership structure. But such aforementioned structures do not provide flexibility to distribute the income and also offers low levels of asset protection for the company. With so much economic uncertainty at the moment, asset protection is one of the things that you can do in order to get back your peace of mind, irrespective of what is happening in the economy.


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