One of the most common questions asked of the BECIR is "What type of business structure should I use to protect my personal assets?"

Some of the more common structures that may be risk of exposure to possible claims are:-

1. The most common is the sole trader; a sole trader is personally liable for all debts incurred by him/her on behalf of the business. The existence of a registered business name will not reduce the sole trader’s exposure.
2. The second common is a Partnership; both partners will be personally liable for debts incurred by the business and the partnership.
   
   Which assets are at risk of being claimed by creditors? The general rule is that apart from some exceptions, all property held even if you become bankrupt as the property may be liable to vest in the trustee in bankruptcy. The assets can be divided amongst the creditors of the bankrupt’s estate.
3. Lastly, Companies, as a separate legal entity, can enter into contracts and incur liabilities in its own name. If the company cannot repay its debts, it may be forced into external administration.
   
   Recently, ASIC has closed off the loops that made directors exempt from liability for the company’s debts, but because of the closed off loops Courts are finding new ways of imposing direct liabilities on directors and there officers.
   
   All of the above have various plus and minuses, however, if you run your business with integrity and good clear communication with your suppliers and customers you should be able to minimize the risk of such  claim’s.
   
   Always be open and transparent in your business dealings, nothing destroys confidence faster than doubt and mistrust, sometimes it can be tough to be honest, but where there is unquestionably honesty there is trust, and where there is evasion there is mistrust.

Written by Tony Axford, BECIR Manager.