The PCR Blog

Helpful news, tips and business advice for small to medium business owners about how to maximise profit, minimise waste and grow and protect your business.

The 5 Principles of Asset Protection for Business Owners

As a business owner, you often have to wear a lot of hats at once, but it’s impossible to be an expert in every facet of business. But there are some aspects of business that require a professional, one of which is asset protection.

Without a professional at their side, many business owners unwittingly leave their assets and wealth exposed to risks, such as legal defamation claims.

When it comes to asset protection for your business, we work as your business partner to ensure your assets and wealth are protected so you can feel confident and in control.

Effective asset protection requires business owners to have a good understanding of what we call the “5 key principles of asset protection” before we make specific recommendations to you. The 1st and 2nd principles apply to all businesses, and the 3rd, 4th and 5th principles start to apply as your business and family wealth grows.


  1. Separate Risk from Assets
  • Business risks should always be kept separate from business and investment assets.
  • You have “risks” whenever you enter into any business or a contractual relationship – with customers, suppliers/creditors, and employees. Therefore; you need to be protected.
  • The minimum business structure required for most will include a trading entity and a separate Asset Holding Entity. We call this a “Level One” Structure.
  • The Asset Holding Entity never has external business “relationships” – it should only invest or loan funds to related entities.


  1. Choose a “Risk-Taker” and an “Asset-Holder”

Within a family group, ideally, you will have two individuals one who will be the nominated “Risk-Taker” and another who will be the “Asset-Holder.”

  • The Risk-Taker will be the main person involved in your business and therefore will be the director of any trading companies (or trustee trading companies). They take on the risk.
  • The Asset-Holder will be “in control” (as a director, trustee and shareholder) of any Asset Holding Entities. Therefore, it is important that the Asset-Holder should not be, or act, or seen to be acting as a director of any trading companies
  • The Risk-Taker should not own any assets in their individual name, if possible. 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. If this is not the case please speak to our team.
  • The Asset-Holder needs to earn or receive (from fully franked dividends or trust distributions) enough annual income to cover loans repayments for the family home and any other assets in their name. If the Risk-Taker makes these payments and is made bankrupt, their Bankruptcy Trustee may attempt to claw back what is known as “contributed equity” as the Risk-Taker has made loan repayments on assets held by the Asset-Holder.


  1. Separate Business Risks from Business Assets

To protect your business, you’ll want to establish a business Asset Holding Entity. This should be separate from your personal Asset Holding Entity.

  • It is important to transfer all Intellectual property (IP), Trademarks, Patents, Logos, Business Names, Plant & Equipment etc. to this new entity.
  • Establish License Agreements to License the use of all IP from the business Asset Holding Entity to the Trading Entity, and/or relevant Service Agreement / Rental Agreements to appropriately record lease/rent of other business assets. Your protection of these assets will not be secure without these documents.
  • The business Asset Holding Entity should not have any other relationships with other parties except for the Trading Entity.
  • If the Trading Entity fails, the assets in the business Asset Holding Entity should be protected with the appropriate paperwork and security registrations in place. A new Trading Entity could then be established, and new Agreements could be entered into to use the assets.


  1. Different Businesses Should Operate from Separate Entities

If a business venture fails it is important that the failure of that business does not affect other business ventures (or divisions within a business). To prevent this different businesses need to operate from separate business entities.

As an example, if water leaks into a submarine, the compartment can be “locked-off” to prevent water from getting into other compartments and sinking the submarine. Having different businesses in separate entities allows you to do the same, 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.


  1. Regularly Move all Surplus Funds from the “Risk” Side to the “Asset” Side.

You need to ensure that income and retained profits in your Trading Entity do not remain in the entity as working capital. Instead, you can distribute it to the “Asset” side and have the “Asset” lend it back. You will want to do this because if your Trading Entity has legal action taken against it, then any retained profits can be at risk.

Instead by distributing the profits and have the capital required to be a loan from the Asset Holding Entity you can secure your assets and business by putting in place PPSR Loan Protection.

It is important to 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 and that Asset Entities do not owe “Risk” individuals.

Get in touch with PCR Accounting & Advisory today on 03 9847 7516 to speak to our asset protection accountants.

Owner of PCR Accounting & Advisory, Peter Marmara-Stewart is a top-tier accountant and financial advisor dedicated to helping clients reach their business goals and achieve financial freedom. Peter is highly regarded for his client-focused approach and entrepreneurial spirit, catering to a diverse range of professionals across a wide scope of industries all across the country. Peter’s expertise can help you plan effectively, set goals, maximise profits and protect your assets. Get in touch today on (03) 9847 7516.