Starting a Business
15. Personal Estate Planning
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 24 Sep 2015
- The decision to start up a business should be considered in the context of your personal and family circumstances.
- Usually individuals start business operations with a view to making a profit and increasing their personal and family wealth. However when things go wrong or your business is failing personal and family assets can sometimes come under threat.
- Certain business structures such as trusts and companies are better at protecting your personal assets if a claim is made against the business or the business gets into debt.
- Any decision about business structure and ongoing management should take into account how protected your personal and family estate is if a claim was made against your business. This depends also on how much personal risk you feel you can take.
- Running your business as a sole trader or partnership means you need to give careful consideration to asset protection as well as insurance against any potential legal claims. Operating your business through these structures means that you or your partners can become bankrupt rather than the business itself.
- It is important to understand that running your business as a sole trader or partnership opens you up to personal liability to creditors rather than creditors only being able to claim from the business itself. This means your personal assets may be at risk from claims by creditors.
- With a company it is the company itself that becomes insolvent when it has too much debt. The company must not continue operating and will generally go into:
- voluntary administration;
- receivership; or
- liquidation.
- Usually your personal assets will be protected and only the assets of the company will become available to creditors.
- Speaking with a lawyer from the beginning can protect your personal estate in the long term by ensuring that even if things go wrong in your business your personal protection is maximised.
View more Information on Business & Company