In the previous article of Business structuring we discussed the first two lines of defence. The first line is based on insurance covers and the second line is the separation of your private and business assets. In the following we will focus on the third line of defence which is called business structure.
When hearing the words of business structure first thought which will came up can be the structure and organisation of departments and processes in the company. This is the most obvious and is necessary for a smooth workflow, especially when businesses are increasing.
The number of employees are rising, as well as the number of clients, sales and so on. All has in common that new infrastructures are required to keep the business operating in an efficient way.
The same thoughts and reasons can be adopted when thinking about asset protection and business structures. What is happening if a business sells an article which has a defect based on which arises damages on property or persons. The blame and responsibility for the caused damage could go back to the origin of the defect article which was the source of the happened. Based on the given responsibility it is possible that the hole business including the management have to compensate the damages.
In such a case your first line of defence will step in, if your cover includes this type of damage and the insurance does not find any reason which keeps them out of paying the damages. Let me say this short excursion about insurances and their responsibilities. The insurers duty is to provide covers to a group of customer, the premiums for the specified risk cover is calculated on previous damages and likelihood or possibility of future compensations. Meaning if more compensations are granted to their customers, the higher will be the premiums for the whole group of customers or in some cases the personal premium. Based on the said it is in the interest of the customers and the insurer by itself to check carefully each compensation if it can be granted or if there are any reasons which are speaking against it.
This said your first line of defence might not cover the damages which you thought are covered, as higher the damages are as deeper the check from the insurer. Your second line of defence sets up a wall between your private assets and your business. The job of it is the protection of your private assets and protect yourself from personal liabilities were possible, as also to protect your personal life. The second line is not therefor to protect your business by itself or in the circumstance as stated. So it is coming down to the question if your business has deep enough pockets to pay the damages or if it can open up a source which can lend you required amount of money.
Business structuring will not make the claim go away, but it could give another chance then to close your business and it can bring you into a stronger position for negotiation. This is the aim which your third line of defence is aiming for, to put you in a better position and to give another way out.
This will be the topic in the following, how a business structure could look and which advantages can it offer.
The structure of a business is based on a high level of individuality, this is the reason why in the following will be written general examples and are there to bring up different thoughts. Said this the following cannot be understood as any type of personal advice. Please seek advice from your attorney and accountant to get advice matching to your personal situation.
For the first step it is important to take a deeper look into your business, especially what does your business, how does it and how does your balance sheet look. For example is it a trade company, is it a service business or producer.
When you have in your company machines, licensees or other values which are counted to the inventory this assets have to be separated from your daily actions. Meaning if this is the case it is to recommend that you hold in one separate entity your business assets and in another entity you are doing your business. When done this separation correctly you should gain a legal barrier between both entities and a level of protection for your business assets.
When using this kind of structure you ensure that your business actions and possible damages out of it stay away from your business assets.
With this first two key points of business structuring you can protect yourself and your assets private as well as business from the most likely happenings. Asset protection cannot protect you from every arising liabilities and damages, but it will rise the amount of time and work which any opposing party must put in to get anything from you. More time and work goes mostly hand in hand with rising costs.
As this is just the top of the iceberg it should give an impression of the third line of defence in your personal asset protection.
When hearing the words of business structure first thought which will came up can be the structure and organisation of departments and processes in the company. This is the most obvious and is necessary for a smooth workflow, especially when businesses are increasing.
The number of employees are rising, as well as the number of clients, sales and so on. All has in common that new infrastructures are required to keep the business operating in an efficient way.
The same thoughts and reasons can be adopted when thinking about asset protection and business structures. What is happening if a business sells an article which has a defect based on which arises damages on property or persons. The blame and responsibility for the caused damage could go back to the origin of the defect article which was the source of the happened. Based on the given responsibility it is possible that the hole business including the management have to compensate the damages.
In such a case your first line of defence will step in, if your cover includes this type of damage and the insurance does not find any reason which keeps them out of paying the damages. Let me say this short excursion about insurances and their responsibilities. The insurers duty is to provide covers to a group of customer, the premiums for the specified risk cover is calculated on previous damages and likelihood or possibility of future compensations. Meaning if more compensations are granted to their customers, the higher will be the premiums for the whole group of customers or in some cases the personal premium. Based on the said it is in the interest of the customers and the insurer by itself to check carefully each compensation if it can be granted or if there are any reasons which are speaking against it.
This said your first line of defence might not cover the damages which you thought are covered, as higher the damages are as deeper the check from the insurer. Your second line of defence sets up a wall between your private assets and your business. The job of it is the protection of your private assets and protect yourself from personal liabilities were possible, as also to protect your personal life. The second line is not therefor to protect your business by itself or in the circumstance as stated. So it is coming down to the question if your business has deep enough pockets to pay the damages or if it can open up a source which can lend you required amount of money.
Business structuring will not make the claim go away, but it could give another chance then to close your business and it can bring you into a stronger position for negotiation. This is the aim which your third line of defence is aiming for, to put you in a better position and to give another way out.
This will be the topic in the following, how a business structure could look and which advantages can it offer.
The structure of a business is based on a high level of individuality, this is the reason why in the following will be written general examples and are there to bring up different thoughts. Said this the following cannot be understood as any type of personal advice. Please seek advice from your attorney and accountant to get advice matching to your personal situation.
For the first step it is important to take a deeper look into your business, especially what does your business, how does it and how does your balance sheet look. For example is it a trade company, is it a service business or producer.
When you have in your company machines, licensees or other values which are counted to the inventory this assets have to be separated from your daily actions. Meaning if this is the case it is to recommend that you hold in one separate entity your business assets and in another entity you are doing your business. When done this separation correctly you should gain a legal barrier between both entities and a level of protection for your business assets.
When using this kind of structure you ensure that your business actions and possible damages out of it stay away from your business assets.
With this first two key points of business structuring you can protect yourself and your assets private as well as business from the most likely happenings. Asset protection cannot protect you from every arising liabilities and damages, but it will rise the amount of time and work which any opposing party must put in to get anything from you. More time and work goes mostly hand in hand with rising costs.
As this is just the top of the iceberg it should give an impression of the third line of defence in your personal asset protection.
