How to protect your assets

Beware, foolish or “lazy” business decisions can
part you from your assets! And running a business in your own name can be especially dangerous.

Running a business in a private name or in partnership is risky. The owner can lose all their personal assets if the business fails, as it has to be liquidated – a process that involves selling all of the business’ assets, including tools and PCs, or property.If you’re married in community of property, your spouse becomes liable for the debt and can lose their personal assets too. The law says a person married in community of property must get signed approval from their spouse for any loan issued or debt incurred. The best personal protection is to have the business registered as a separate legal entity. This would be in the form of a cooperative, close corporation (CC), a (Pty) Ltd company or trading trust. If the business fails, only the assets belonging to the business (the legal entity) can be taken (attached) and sold to pay off the debt. “Attached” means that the creditor has obtained a court order against the debtor (who owes the money). The sheriff of the court visits the business premises and places an attachment notice on assets that can be sold to pay the outstanding debt. The sheriff can’t take personal assets that haven’t been paid for by the business.

Lending institutions usually refuse to advance a loan to a business where the directors or members haven’t signed personal surety for the loan. That means, despite the kind of company you have, you become personally responsible for the loan. Avoid this at all costs. Don’t let the loan provider make you sign your personal assets away!It’s quite simple to register a legal entity. Most of them are registered with the Companies and Intellectual Property Registration Office (CIPRO), which is part of the Department of Trade and Industry. Visit their website (www.cipro.gov.za) to understand their services. Get professional advice when registering your legal entity to make sure you get what’s best for your business. Don’t forget all businesses are required to have an accountant whose name is entered onto the business profile. The only exception is a cooperative, which can get special dispensation to register an accountant at a later stage.It might be costly to get professional advice, but not as costly as losing your business and your personal assets.

Susan Pletts runs Wanyuka Consultants in KZN, which provides various services, including farming training and mentorship for emerging farmers in KZN. Contact her on 082 572 3724, or [email protected].     |fw