MINIMISING BUSINESS RISK MADE EASY

One of the craziest unnecessary risks is to trade as a sole trader or partnership rather than as a limited company just to save a few dollars. I regularly see examples of unincorporated business owners coming to grief:

1. The husband and wife partnership who got into difficulty so used the finance readily available from the IRD. They now owe $95,000 in unpaid GST and their business is sinking fast. Unfortunately they are going to go down with the ship. 
2. The sole trader who received a totally unexpected legal claim for $260,000. His insurance company refused to pay because they said the claim was late being notified. Bankruptcy beckons.
3. Another husband and wife partnership has just received a demand for $200,000 from the liquidator of a customer who went bust a year ago. Their legal fees to defend their position are mounting. Liquidation of their own business is not an option because they are a partnership but that would have been the best choice.
4. A new client was in a two-man partnership. His business partner ran up business debts willy-nilly and then cleared off to Australia. Guess who had to pick up the tab for his partner's debts? 

All these business owners were of modest means and had families. Why would anyone risk their future well-being (and probably health) to save $500 or so?

If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail me at nick@abac.co.nz. The information in this article is of a general nature and should not be relied upon as a substitute for specific advice. 

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