Business Structure diagram at Your Legal HQ Lawyers, Osborne Park, Perth

Business Structuring.

Every business needs a structure. For the most part, accountants and business advisors tend to look at this primarily from the perspective of tax efficiency and administrative convenience.

However, there are other factors which need to be considered in order to choose the best business structure for you. These include:

  • Asset protection

  • Long term control

  • Exit strategy

  • Enforceability (of arrangement between the co-owners of the business).

It is easy to think that you can fix these issues down the track after the business has matured. However, fixing a business structure might involve paying transaction costs like capital gains tax (CGT) and stamp duty.

Investing a little bit more time and resources in planning things through at the beginning means that you can avoid these types of cost-shocks down the line.

Business structure and restructure plan with asset protection at Your Legal HQ Lawyers, Osborne Park, Perth

Business Restructuring.

Business structures are like cars.  Sometimes you need to change them or upgrade them to deal with new or evolving circumstances.  Clinging to your old structure may cause you more harm than good.

Restructuring a business is not an easy task.  There are numerous legal and tax issues that need to be considered before you put pen to paper.  Missing a step could negate the benefit of the restructure or cost you additional dollars in income tax and stamp duty. 

Traditionally, accountants have handled most business restructures by engaging commercial lawyers to prepare the legal documents, as and when required.  The downside with this is that most commercial lawyers are not tax lawyers, which means that some tax issues get lost in translation which can be frustrating for both client and accountant.  Worst case, there is a substantive hole in the documents and the accountant and lawyer are left pointing the finger at each other.

Your Legal HQ is one of the few tax practices outside of the big firms.  We understand tax, so we know what your accountant is driving at when they tell us what they propose to do with your business restructure.  We can also use our own tax expertise to tweak things when the opportunity presents itself. 

  • Asset protection strategies are insurance against financial disaster.

    We are not talking about helping people to get credit and avoid paying the piper – that’s plain wrong. We are talking about how you avoid financial ruin when you run into deep trouble and matters turn from business to pure survival.

  • There is a single fact which shapes my answer to this question, although my answer is not the only one.

    That fact is ,most business people acquire their assets (or most of them) from an income stream – their business.

    What needs to be protected first and foremost is the asset base which forms the business.

    Although the house, car investments and the yacht are also important, the business assets allow you to generate income and start again.

  • Well, it always starts with creditors, but when things are dire, every creditor has the potential to appoint a liquidator or a trustee in bankruptcy. They are the worst.

    The reason for that is because unlike creditors, a liquidator or trustees in bankruptcy:

    1. have the ability in certain circumstances, to ignore asset protection measures you have entered into and drag assets back for creditors; and

    2. they do it for a living.

  • Generally, they are transferred to an entity which is not likely to be the entity that liquidators or trustees look at when they are trying to pay out creditors.

    The theory of this is great. If I give ownership of an asset to someone and do it properly, it becomes someone else’s and my creditors can’t get it.

    In practice, this does not work well and we’ll move on to find out why.

    To protect an asset, you need to transfer it away from the entity which is going to be taking on the risk – that’s generally the trading entity. Because if the entity which ends up owing a lot of money doesn’t own an asset, a creditor can’t take it.

    But there’s no point in giving it to a stranger and saying “there you go mate – enjoy!”

    So it’s going to have to go to an entity controlled somehow by:

    a. you personally;

    b. a spouse;

    c. a child;

    d. a trust ; or

    e. another company controlled by you or your spouse.

  • Sometimes, moving assets around to different entities will cost you some tax. Whilst your assets will be protected after the move, each move may cost you in tax. We specialise in minimising the tax cost in moving assets and the amount of movements required and apply any tax concessions where possible for the best outcome.