Guy Gardiner Accounting Now accountingnow.co.nz

One of the scarier aspects to owning a business is the worry something will go wrong and you'll be sued for all you're worth.
Here's what you can do to minimise the risk of losing the shirt off your back.
Set up a company – if you are in business as a sole-trader or a partnership and things go badly wrong, then you can expect to be taken for all you're worth. If you operate as a company, however, you will enjoy the protection of limited liability. This means if the company goes belly-up, then provided you have played by the rules, you will only lose the assets owed by the company; the family home, batch and the boat will be safe. Companies can be set up for a few hundred dollars.
Set up multiple companies – if your trading company has megabucks worth of assets, such as vehicles, plants and machinery, then the company's limited liability isn't that limited. A solution is to set up two companies. One company owns no assets, but does all the work, the second company is only a holding company – it owns all the assets and leases these to your company, which does all the work. If anyone wants to sue, they can only sue the company with no assets because they have no dealings with the holding company.
As a business owner, you deserve the rewards, but at the same time you need to ensure you are mitigating your risks. There are plenty of other asset protection options available, so call Accounting Now or your accountant to discuss your business structures.