Many clients consider setting up a new business and inevitably use an incorrect structure which is not effective for not only tax purposes, but also for asset protection. Tax is complex in nature, so we won’t cover this here. Asset Protection is often misunderstood or not considered in the structuring of business affairs.

1. Separate risks from assets


  • Business risks should be kept separate from business and investment assets
  • When running a business, you have “risks” whenever you enter a business relationship (with customers, suppliers/creditors, and employees).
  • In most cases, the minimum business structure required will include a trading entity and a separate asset-holding entity. We call this a “level one” Structure.
  • The asset-holding entity should never have business “relationships” – it should only invest or loan funds to related entities.
2. Choose a “risk-taker” and an “asset-holder”


  • Within a Family Group, you should choose one individual to be a “Risk-Taker” and another individual to be an “Asset-Holder”.
  • The Risk-Taker should be the main person involved in your business and therefore should be the director of any trading companies (or trustee trading companies).
  • The Asset-Holder should not be, or act, or seen to be acting as a director of any trading companies. The Asset-Holder should be “in control” (as a director, trustee and shareholder) of any asset holding entities.
  • Where possible, the Risk-Taker should not own any assets in their individual name. The Risk-Taker should be an “unattractive” target to take legal action against. In most cases, the Family Home should be owned 100% by the Asset-Holder.
3. Different businesses should operate from separate entities


  • To prevent the possible failure of one business venture affecting any other business ventures, different businesses (or divisions within a business) should operate from separate business entities.
  • If water leaks into a Submarine, the compartment can be “locked-off” to prevent water getting into other compartments and sinking the submarine. In the same way, if problems develop within a Business (it fails, legal action is taken against it, etc), it should be kept separate from other successful business / divisions so that these can continue.
4. Regularly move all surplus funds from the “risk” side to the “asset” side


  • Ensure that income from your Trading entity does not remain in the entity as working capital.
  • If your Trading entity has legal action taken against it, then any cash assets are at risk. Instead, fully distribute the profits from your Trading entity at least once each quarter, and to provide working capital lend them back by an Asset Holding Trust and using a Secured Loan Agreement.
  • Ensure that any Trading entities have the minimum of assets (small amount of cash, debtors and stock only), and that no loans remain owing from individuals or related entities TO the Trading entity