Meet Ella. Ella runs a business and has signed a personal guarantee for its borrowing. She and her partner, Adam, own their home together. Nothing has gone wrong, but they’ve started wondering how the business risks and the way they own their assets fit together. A review won’t make risk disappear, but it can help them understand their position and consider their options before there’s a problem.
If you run a business, you take on risk. You might be a director, sign contracts, employ people or make decisions that affect customers and suppliers. It’s worth understanding where your personal assets sit in relation to those risks
Many business owners leave that question until later. Sometimes they don’t ask it until the business is under pressure. I’d rather have the conversation earlier, while there’s time to understand the options and make considered decisions.
How does business risk affect your personal assets?
In some businesses, one partner is closely involved in running the business and the other isn’t. Yet they may own their home or other assets jointly.
That can be a sensible choice. But it should be a conscious one. If one person is the risk-taking partner, it’s worth asking whether joint ownership still suits the couple's circumstances.
I often start with a simple question: why is this asset owned jointly, and does that still make sense? The answer depends on the people, the asset and the business. But it’s a conversation worth having.
This doesn’t mean every jointly owned asset should be transferred. A change in ownership can have tax, legal and other consequences. In some circumstances, transferring assets when a claim or financial problem is on the horizon can create serious complications. Get advice before taking action.
When should you review your business structure?
The way you own assets and operate your business can make a difference to how risk is managed. A business structure that suited you when you started may not suit you now.
It’s worth reviewing your arrangements when you:
- Start or buy a business.
- Become a director or take on a senior role.
- Sign a personal guarantee or take on significant business debt.
- Buy assets with your partner, particularly if only one of you is involved in the business.
- Grow the business or build up personal wealth.
These are natural points to check whether your structure still fits. You don’t need to wait for a dispute, a claim or financial pressure to review it.
How can your business structure affect personal asset protection?
A business structure can help determine where business activities sit and who owns particular assets. For example, a business might operate through a company, while other assets are held separately. The right approach depends on the business and the people involved.
A company or trust may be part of an asset protection strategy, but setting one up doesn’t make risk disappear. Directors may have personal responsibilities, and business owners may take on personal guarantees. The structure also needs to reflect how the business actually operates.
Asset protection isn’t simply about choosing an entity or moving assets. You need to look at the business, the owners and the assets together. Insurance, borrowing arrangements and the way different entities work with each other may also matter.
Good advice brings those pieces together. It looks at the risks you face, how your assets are owned and what changes could make sense for your business and personal circumstances.
Why plan before a claim or creditor issue?
Asset protection is best considered before a claim or creditor issue is on the horizon. Moving assets once a dispute or financial problem has emerged can create serious legal and financial complications.
Planning early gives you time to understand the alternatives. You can consider how a change may affect ownership, tax and the way the business operates, then decide whether it’s worth doing.
The goal isn’t to create a complicated structure for its own sake. It’s to make sure the way you own and run your business reflects the risks you take and the plans you have.
Get advice on your business structure for asset protection
There’s no one asset protection structure that suits every business owner. The right answer depends on your business, your assets, your personal circumstances and the risks you carry.
If you own personal assets and run a business, take a look at how those assets are held and whether your current arrangements still make sense. BlueRock’s tax and business advisors can help you review your structure and consider your options. Get in touch via the form below.
Disclaimer: The content is intended as general information/advice only and should not be considered as advice on any matter and should not be relied upon as such. This has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information in regard to these factors before acting or seek advice before making any financial decisions. Any scenarios mentioned are fictional and for illustrative purposes only.
