Running a business out of a structure that does not protect the Business or Personal Assets is one of the most common mistakes in business today.

A Pty Ltd Company structure offers very little protection, if any.

Should the business fail, all Personal Assets in the Directors names as well as all Business Assets in the company name are at risk.

A professionally designed business structure can overcome this problem.

If designed correctly, it will also provide the ability to legally reduce your income tax liability to a minimum.

I got involved in this type of work back in 2004, after I witnessed a friend lose everything due to his business failing.

You hear about it all the time.

Due to incorrect advise from advisers not qualified in this field, people start up business in a variety of structures.

It is not until it is too late that they find out that everything they own and have worked so hard for is at risk.

Everybody has insurance in place, and gladly pays the premium just in case the unforeseen happens.

The putting in place of a professionally designed business structure to run your business out of should also be considered a form of insurance.

The main difference being that there are no annual premiums to pay.

You pay for the designing and implementation of the structure at the outset only once.

Our structures are scrutanised by our specialty solicitors to insure that they will stand up in court should they be attacked, before being implemented.

Most people do not realize the many ways that they can lose what they have worked so hard to accumulate.

If you are a landlord, your tenant (alleging injury) could sue you for everything in your personal name (this could include your family home and business).

Should your business fail, your creditors could sue you (as director) for everything in your personal names (this could include your family home and investment property).

In 2007 changes were made to bankruptcy laws, allowing the trustee in bankruptcy to access your superannuation fund (section128B).

Should you be sued, and your insurance company accused you of some form of impropriety, you would then have two court cases on your hands.

One proving your innocence and the other fighting the insurance company.

Our aim is to make it financially prohibitive for anybody to sue our clients.

We structure our clients in such a way that should a mishap happen in one area of their lives; it will not totally destroy them.

These types of structures can only be put in place when there are no signs of there being a problem.

Should the unforeseen happen, and the creditors can prove that the business was trading whilst insolvent, the courts can overturn the structures.

The best time to put these structures in place is now, when you do not need it.

Wait until you do, and it will be too late.

As long as your business is viable, you should be talking to me.

martinfs@bigpond.com

I would like to bring to your attention the most common legal mistakes in business.

Your trusted professional advisor has provided this information to you because they care.

As you read through this information, you will realise the implications and the affect that these common errors would have on your business.

My advise to you as a self-employed person running your own business, is to surround yourself with Trusted Professional Advisers that you can rely on.

Should you be unsure as to whether these matters have been addressed in your own situation, please contact the person that passed this information to you immediately.

Business owner dies without a will or becomes disabled:

This can result in all business accounts being frozen. 

Some mitigating actions include:

1. Having a will, which includes a business clause allowing a trustee to run your business. 
2. Having an extra person authorized to sign documents e.g. enduring Power of Attorney.
3. You should give serious consideration to having adequate life and accident insurance cover.

The Business is sued and the Personal Assets are at risk:

This is an important reason to ensure all that business operations are conducted through a purposely-designed Business Corporate Structure, which protects your Personal Assets.

Not mediating disputes early:

Lawyers are expensive and there is no guarantee you will win.

Litigation is also very stressful; in most cases it will probably be cheaper to resolve the issue as early as possible.

If you have no Assets at risk, either Personal or Business, an early settlement (if at all) is much easier.

Many a person has lost everything in proving their innocence.

No Shareholder / Partnership Agreement in place:

Nothing lasts forever, especially partnerships.

Having a buy / sell agreement in place from the outset of your business venture, will make later splits quick, cheap and acrimonious.

If you are in business with another person, you have an insurable interest in their life.

A buy sell agreement funded by cheap Term Life & Disability Insurance is an excellent way to address this problem.

Would you like to support your deceased partners heirs for the rest of their lives.

Without an agreement in place prior to death, that is exactly what you will have to do.

Business Agreement does not have terms and conditions:

Having the above agreement in place, without specific terms and conditions that are binding on the estate of the deceased is a total waste of time and money.

Failing to protect Intellectual Property:

If you have specific ideas, processes or products that are unique to your business, they need to be protected.

Failure to protect Business / Product Names:

Ownership of logos and / or business names should be protected.

No written Contracts with Employees:

Employment agreements should include a confidentiality clause and protection of your client database.

Placing limits on access to new employees within a certain area of your office and prohibiting the soliciting of your customer database is only a small area, which must be addressed by this agreement.

Contracts and Agreements are not read and understood:

Take responsibility to understand what you are signing – especially if it is an important document.

Ignorance is no defense once a document is signed.

If you found this information of benefit to you, please call the person that sent it to you and thank them.

I feel sure they would appreciate it.

Kind regards

  martinfs@bigpond.com

Courier Mail - 10th Nov 2008

THE banks must pass on the full reduction in official interest rates to business as soon as conditions in financial markets ease, a leading business lobby group says.

Mtge & Finance Brief Oct 2008

Chartered Accountant and registered tax agent Jo Kelab of australianbiz.com.au says income taxs laws on the provision of fringe benefits to employees, their associates and clients are complex, especially at Christmas.

Holding a Christmas party is fraught with tax requirements, so its best to run any ideas past your accountant. Again, it all get back to the planning. “Christmas parties consitute ‘entertainment benefits’ and as such are subject to fringe benefit tax (FBT) unless specifically exempt, or they are subject to the ‘minor benefits’ exemption,” explains Kaleb.

A minor benefit is one that is provided to an employee or their associate on an ‘infrequent’ or ‘irregular’ basis, which is not a reward for services, and the cost is less than $300 per benefit inclusive of GST”

He says holding the Christmas party on the business premises on a working day is usually the most tax effective, because expenses such as food & drink are exempt from FBT for employees with no dollar limit, but no tax deduction or GST credit can be claimed.

“Alternatively, Christmas parties held off the business premises are exempmt from FBT where the cost for the employee and their assocaite is each less than $300 inclusive of GST, bit no tax deduction or GST credit can be claimed.”

In regards to gifts, Kaleb says that non enterainment gifts provided to employees are usually exempt from FBT where the total value is less than $300 inclusive of GST. A tax deduction and GST credit can also be claimed. These include flowers, wine, perfumes, gift vouchers and hampers.”

Kaleb recommends keeping these tips in mind:

• Non Entertainment gifts given to clients and suppliers do not fall within the FBT rules as they are not provided to employees. Generally a tax deduction and GST credit can be claimed for these gifts, provided they are not excessive or overly valuable
• The provision of entertainment gifts has different tax implications ( examples include threatre tickets, passes to attend musical, live play, movie, tickets to a sporting event or providing a holiday) Where the cost for the employee and their associate is less than $300 each GST inlcusive, there is no FBT, no tax deduction is allowed and no GST redit can be claimed
• However, if the cost for the employee and their associate is each $300 or more GST inclusive, a tax deduction and GST credit can be claimed, but FBT is payable. The cost of any entertainment gifts provided to clients is not subject to FBT and no tax deductions olr GST credit can be claimed.

Peter Switzer

Mtge & Finance Brief 10/2008

Business needs to proactive about their obligations to close off 2008 and avoid any shortfalls in the new year.

As the end of the 2008 draws to a close, have you consider all your bases? SME’s need to plan ahead to close off the year and make sure they abide by all their obligations - the taxman - as well as keeping the business on a firm financial footing. This includes everything from cash flow over Christmas and the tax implications of employee gifts or Christmas bonuses, to things that can be easily overlooked, such as where your mail gets sents when you’re on holidays.

So Where to start?

A leading debt agency warns small business owners that Christmas is a time when cash crisis occurs, and that your better off being realistic than leaving your head in the sand and exposing yourself to a potential New Year Shortfall.

Roger Mendleson, CEO of Prushka, debt recovery experts, explains why Christmas can burn cash. “There is generally a heavy cash burden on small business, with Christmas pays, and reduced output amd billings/orders in the week leading up to Chjristmas’ says Mendelson. “Those businesses running tight before Xams are more likely to ‘fall over’ in February/March than in any other time of the year.”

The time left to head off a cash crunch before Christmas could be tight, but your New Years’s resolution has to be to get into cash & tax planning.

We’ve all been told that Christmas is the time to be merry, but it should also be the time to be well prepared. The Five Ps adage applies: perfect planning prevents poor performance.

Silly Season Strategies

The festive season comes upon us usally when we are dying for a break and a bit of lateral thinking makes smart business sense. The thinking should be applied to the all-important areas of customer service, staff management and supplier management.

The handling of this unsual buisiness experience should be easier if you have traded through or closed down over the holiday period before. However, that doesn’t mean you’ve done it right in the past.

You might not know if you lost business because the prospective client who rang on 2 January- when you took an extra day off because New Years fell on a Thursday- never ring back.

You never know who your ptoential clients are. Perhaps he was a customer worth $100,000 a year profit, and part of a network of past-past growth businesses. So he is out there referring business he finally went to, when you weren’t there!

The bottom line is that you have to plan for this period, of course, it means you need to have systems in place to handle not only the expected but also the un-expected.

Taking Care of business

Lets start with the closed down operation. It’s obvious this busines needs to tap into telecommunications options available. The reality is that anyone ringing up over the festive season is desparate for supplies or service. They could be in the biulding sector where supplies or services could be vital to honouring a contract.

It would be smart to consider emailing or mailing to current customers informaing them of the times you plan to close your business down. This is a courtesy call and its not only showing you are a caring supplier, but you are giving them an alert if they need to order more of your goods or services for Christmas.

Your Customers could be serviced by an’Out of Office’ automatic reply to emails, which remind customers and tells new ones when you are back on deck. A special answerng machine message should be planned to give dates for the break, emergency contact number if you really are into customer service, and you might even pay for a messages to be answered by a messaging service with real people.

Cover all the Bases

It wouldn’t hurt to pay a visit to a telecommunications expert to find out what options are available. Being time poor and being unwilling to talk to experts can make you poorer in money terms.

For those trading over the holiday period, assume nothing. Make sure crucial suppliers know what your expectations are and if need be get written undertakings that you’ll be recieving deliveries. This is the perfect time to make a list of the things that could go wrong and then ensure you have these vulnerable basis covered.

Planning Ahead

For staff, managing expectations is important. Many small firms have encountered problems with staff around festive period because of poor communication. It has also underlined the problem of not having a written contract between you and your staff.

Calling a meeting after informing everyone in writing about your Christmas trading plans is a good idea. Many employers & employees do not get their entitlements and responsiobilities. The mixture of public holidays, holiday leave loading and staff managing their families’ expectations means that you have inform your staff as early as possible about your trading plans. Addressing early give you plenty of time to arrange replacement if need be.

Failure to plan for this all important time might not only mean you lose customers, you could also loose staff! Wouldn’t that be a great start to the New Year?

If these recommendations have you thinking, well, think a little bit more. The difference between a good and bad business is often linked to the systems put into place to handle all sorts of situations.

An effective system developed to handle the holidays makes you and your business more proffessional and hopefully more profitable.