Running a business can be a treacherous business at times. It’s always important to do as much forward planning as possible and consider all the worst case scenarios and decide what actions you will take. Some business owners ignore the exposure that their business assets face should the worst happen. Assets like key pieces of machinery, the business property and even personal loans made to the company by a shareholder or director are all exposed to the full business risk. Should the business find itself in trouble, say through a big, bad debt, then those assets can be used by creditors to recover monies owed.
It is possible to protect such assets from business risk and make them available for future use. Here are our top three tips on how to do so:
- Sell your business property to a pension scheme belonging to the business owners. Not only does this protect the asset from creditors by removing the asset from the balance sheet but it’s also tax efficient.
- Always consider making a directors load under debenture, rather than as an unsecured load to the company. In liquidation or administration the director can legitimately withdraw the loan amount without fear of preference against other creditors.
- Consider using a holding company to hold the shares and key assets of the main trade. The holding company then rents those key assets to the subsidiary. If the subsidiary falters the assets are safe.
If your business is already in trouble it may be too late to follow this advice, but it’s always worth a conversation with a qualified accountant, used to dealing with asset protection. But it’s never too soon to put measures in place and make sure your business is properly protected against future failure.
Andy Parker
Chartered Accountant Birmingham