• One of the key disadvantages of operating as a sole trader is the difficulty of protecting your personal assets from any claims arising out of the business.
• A business operated by a sole trader is not a separate legal entity from the individual operating the business. This means that unlike a company the business does not have its own debts or have any of its own legal rights or liabilities. These are all part of your personal obligations.
• In addition to this where debts arise from business operations creditors are not limited to the assets of the business when seeking payment. They can also make claims on your personal assets such as your family home.
• Whether or not you consider your business operations to carry a high degree of risk you should consider how your personal assets are protected from any claims against you in your capacity as business owner and sole trader. This may involve:

• placing your primary personal assets such as family home or any investment properties into a family trust structure; or
• having a spouse hold title to these personal assets in their own name.

• When operating as a sole trader you should consider purchasing insurance that will adequately protect you and your assets if any liability should arise from your business operations. Having an appropriate level of insurance can minimise the risk to any personal assets.
• Whichever business structure you choose the management of your personal estate and wealth growth are closely linked with any entry into business.
• Before starting a business you should engage a legal practitioner who can educate you on how business liabilities can potentially affect your personal estate.

Engaging a legal practitioner to assist you early in the process particularly where you are concerned about any potential liability arising out of your business affairs can ensure that your assets are protected in case things go wrong.