Asset Protection for High Risk Professionals & Business Owners

Doctors, Dentists and Lawyers Prepare Thy Self

Professionals often come to their Accountant, Adviser and Tax Lawyer too late. Something goes wrong with your business partner’s client and you pay the penalty. The bankruptcy laws can easily “claw back” recent transfers of wealth.

In our increasingly litigious society, any risk situation is worth a go and any assets fair game. Professional indemnity, public risk and product liability insurance cover is daily becoming harder to get. It only takes a disgruntled patient, a vengeful ex-partner or an unsatisfied customer to do real damage to your hard-won nest-egg. Regardless of whether a claim has merit or not, the reality is that most are settled ‘out of court’ as a matter of commercial expediency.

So how do you protect your assets from the marauding hordes? How do you conserve them for the benefit of yourself and your family without losing control of them at the same time? What sort of a gambler are you? How well do you sleep at night? In short, what are your options?

How can business owners protect themselves?

Running a small business is an incredibly risky, and often difficult, venture. Starting, planning and marketing a small business only gets you off the ground--if you can make it that far. Day-to-day duties require the sound management of office, employees and tax. Then there is that little matter of actually providing products and services, while balancing these duties.

Of course, the bottom line to all of this is turning a profit: one large enough to justify all these expenditures of time, money and effort. Success is the eagerly anticipated reward for taking the plunge and exposing yourself to all of the various risks at all of the various stages of small business formation and growth.

Unfortunately, we cannot offer you the services of a guardian angel to protect all that you have built up in your small business. But we can point you in the direction of the next best thing--a comprehensive asset protection plan.

Asset protection planning is the true "level playing field" on which all businesses conduct economic transactions. Large businesses know this, and they have teams of lawyers and accountants constantly looking out for their best interests, according to the rules of play.

The problem is, most small businesses don't (and won't ever) have these kinds of resources available to them. Moreover, many are unaware of the protections granted to them (and all businesses) under law.

This puts small business owners at a distinct (and unnecessary) disadvantage in the world of commerce, leaving them exposed to risks that may be completely out of their control.

Asset Protection Planning for Your Small Business

However, it needn't be this way. To this end Civic Legal have compiled a set of strategies and helpful advice that, once executed well in advance of any trouble, would help preclude the need for a guardian angel to bail you out of any worst-case scenario.

In addition, these asset protection planning strategies are equally available to debtors and creditors alike, and wise entrepreneurs should engage in these strategies, no matter which side of the relationship they are on. But for the purposes of explanation, the discussion that follows is told from the debtor's point-of-view.

Armed with this knowledge, small businesses should truly be able to compete on that same "level playing field" with their more well-heeled and more powerful counterparts, resulting in a better chance of success and a lesser chance of financial ruin, if things go terribly wrong.

When we meet with you our discussion often deals with three sections:

• Are your assets at risk? sets the stage for the business strategies presented in the next sections by helping the individual understand how a debtor can lose assets to a creditor. Personal strategies here focus on effective exemption planning of your assets and an overview of how these plans would work in a bankruptcy situation. Moreover, guidelines are offered for legally transferring and protecting assets, as well as avoiding creditors' challenges to these transfers. Finally, the complicated rules regarding asset protection trusts are explored in-depth.
• Limiting Liability in your Business Structure explores strategies when initially forming, structuring and funding your business operations. Choosing the type of entity, where to form it, and how to fund it or get financing can have a tremendous impact on how secure your personal and business assets actually are. In addition, minimizing income, Capital Gains Tax and death taxes is a form of asset protection (here it's the government, and not some creditor, going after your wealth), and proper business formation and structuring can go a long way toward reaching that goal. Of course, if your business is already established, nothing prevents you from going back and applying these strategies going forward.
• Avoiding Day-to-Day liability risks focuses on the many risks inherent in operating a business and how to avoid (or at least minimize) your exposure to these risks. Primarily, these strategies urge business owners to avoid leaving vulnerable, unprotected assets within the business entity that could later be seized after defaulting on a contract, committing a tort (negligent act) or having the veil of limited liability pierced by a court. Don't let your employee walk away with inventions, staff and a client list. In addition, strategies are given for dealing with that inevitable day in court, something most successful business owners will be unlikely to avoid because of the nature of business dealings and the rules of our current system of justice. Finally, insurance is discussed as your last line of defence. This includes Business Succession Planning and Key Person insurance.

To be sure, comprehensive asset protection planning is a very complex topic that touches on almost every aspect of business ownership. Your individual plan depends on your comfort level and specific goals for your business. But the goal here is legal protection of your hard-earned assets. Every reputable, honest business is allowed these protections.

Stretching these goals to the purposeful deceit of other businesses or individuals is not asset protection planning--it is fraud. Doing so may put you on another "level playing field," only this one may be surrounded by metal bars and fences.

So before you execute any asset protection plans, be sure to consult your adviser and accountant. We are happy to work with them. By doing the legwork now, you'll make their job easier and your bill for services smaller.

So, what questions do Advisers, Lawyers and Accountants need to ask their professional clients?

Please feel free to begin the process by using the following list prepared by Brett Davies Lawyers.

For a printer friendly Adobe PDF version of this list, click here.

What are my current business structures? Sole practitioner? Partnership? Company? (Sole director?) Trust?
Are there better structures to be in?
In which vehicles should I be working towards?
What are the legal restrictions on how I run my practice?
Where are my personal assets?
Who can sue me?
Am I getting maximum tax concessions and flexibility?
Is a written Business Succession Plan in place and fully funded with insurance?
For my Estate Planning do I have in my Will: 3 Generation Testamentary Trust? Protective Trusts (for bankruptcy)? Superannuation Trusts? Age of Majority Clauses? Maintenance Clauses?
Life insurance - cross owned or to my spouse? (Often exempt from bankruptcy)?
Do I have a Mutual Power of Attorney?
Do I have a Cascading Power of Attorney?
Do I have a Binding Financial Agreement with my spouse?
Is my property owned Joint tenancy or Tenants in Common?
Do I owe the family money?
Does the family owe me money?