Starting A Business? Protect Yourself FinanciallyPosted on: 16 September 2008 by Gareth Hargreaves
Independent Financial Adviser Peter McGahan advises how business owners can safeguard their house and finances against things going wrong.
It's always worth considering protecting your assets by clearly distinguishing between them and a company.
If you are a sole trader or in a partnership your personal assets would be liable if you ran into difficulties or went bankrupt and as such you could lose everything.
If you have a limited company, your personal assets would largely be protected as a company is a legal entity in its own right.
There are many egotistical reasons for setting up as a ltd company such as being called a director but you should set those aside when making a decision.
There used to be number of benefits to being limited of which tax was one, but this has largely been removed with the recent changes in tax law. If you felt you may be exposed to downturns and wanted to protect your assets, a limited company may be an option.
Don’t automatically assume you will be protected however. A company run badly and say overtrading for example could easily find the directors responsible along with their personal assets.
Many businesses I see do actually need to borrow money and new start ups will have no chance borrowing from the bank as there is no track record. Quite often they will ask for a personal guarantee on any personal assets which effectively removes the benefit of limited liability so seek advice from a qualified business finance adviser.
"If I wanted to start a business, what should I do to safeguard my house and savings?"
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