Small Business structure for mum & dad

[RPI]

I hate lawyers

So many people do, that is until they need one.


People do lament the shades of grey that are inherent in the law, but it is that which allows innovation in business structuring. The service trust for professional firms only came about because an innovative accounting firm in the 1960's wanted to separate some of the assets from the accounting owners. ATO took them to court and the court found for the accountants.

It is only because of the success of Companies in limiting liability that we have all those provisions which have been created to try and get the directors. Director penalty notices, personal guarantees etc were designed to do just that and the continued attempts to be able to pierce the corporate veil are wrong IMHO.

If, however, the directors don't own anything, then apart from criminal proceedings in certain situations, there is a lot more protection.

I have just put a client through liquidation and personal bankruptcy and while that is still painful,he had no personal assets. He is a beneficiary of several trusts, one that owns a high cashflow business, some others that own real property. I have a feeling that the people that control those trusts will look after this client, purely out of their generosity and ensuring that it does not conflict with any bankruptcy issues etc. He ended up losing what was a large and very successful business, that had he not had to borrow against to pay out his ex-wife, would have managed to get through the current down turn. Obviously losing something you built up over 20 odd years is still quite devastating, but knowing you won't be destitute helps.

I am always for setting up great structures early on, things grow over time and yes it is a bit more expensive at start up, but no where near as expensive as trying to reorganise when you have grown.

Just some ramblings from one of those people that Devank hates

 

[Terry_w]

ok, so bear with me ...

with the toilet thing it sounds like the language used that has caused the confusion and possible blurring between the company and the person who attends weekend bbq's on their own time.

if he had said "I own a company that does toilet installation" this may have been clearer?

given your original mention of a jv gone wrong and family groups if I ever was involved in anything like that then need to be VERY careful to use language (verbal and written for ALL communication) that clearly reflects the contracts, the agreements, the structures in use. if I was ever in business I need to use language that describes the business for what it is. Don't get so into sales mode at the front end that I say things like "shell be right mate I'll make sure you are ok, Im gonna look after you and we are gonna make millions..."

is that the gist?

That is a large part of it. But even if you had state "my company can install a dunny for ya" then he could still sue you as a person saying the agreement was with the individual.

You have to be extra careful about documentation, emails - use business and not private, notes, location of meetings, those present at meetings (keep spouse away), bank accounts -never put company money in your private account (eg you may have installed a $1000 toilet and put the cash received in your personal bank account, he could use your statements to prove you received the money and not the company)., invoicing (when you buy the toilets make sure names on the invoice is the company) etc etc.

And, avoid oral agreements. Make a little A4 paper agreement and get them to sign your terms before starting.

 

[knightm]

thanks terry and rpi these are good ideas and good advice. I will use these thoughts a lot in the future.