Written by Schon Condon in July, 2010

On a recent advisory matter we were introduced to we arrive at the business premises and after being given the general look around picked up one of the business cards off the counter which proudly announced ‘“Blah, Blah, Blah” proudly owned and operated by Mr X and Mrs X.’  It was clear not just by the warm reception and passionate air to their approach, but also by the very wording of their card that they were very proud of their business.

We then sat down with the owners and to discuss the parameters of our assignment when I queried that when I had arrived I had the understanding from their external accountant that the business was actually operated under a corporate structure.  This they confirmed was correct and that in essence it was the husband’s business in which the wife did have some degree of involvement.

The entire presentation, short of an invoice showed no ready or distinctive denunciation of the fact that the business was in fact a corporate entity.  It was acknowledged that the necessary stationery, invoices etc, did actually contain the relevant and legally required information.  However as we drew to their attention the potential legal door had been opened.  In the event that a claim is made the potential claimant will seek to use any piece of evidence they can to make a claim against any and all possible parties, and in particular both husband and wife where they can because they can generally rely on the fact that one or both of them will be asset holders.

We often address the issue of structuring so as to ensure that the appropriate assets are exposed to appropriate threats, but all this planning can be suddenly brought undone by the silliest little mistake.  Some will say that because there is an appropriate structure in place such claims can easily be defeated, and I’m not to say that that is not true, however it can be costly.  The safest way to avoid a legal claim being successful against you is by not putting yourself in the position that someone can make the claim in the first place.

In pursuing these situations the claimant is seeking to place you in a position where there is a definitive cost involved to extricate yourself, thus at least a partial settlement can be achieved on the basis that “its going to cost you X to fight this so why not offer us Y and we’ll drop the action against you.”  Had they not been in the position to start then you would not be in the position of thinking about settling.

All the efforts in the world to properly structure your affairs can be very quickly brought undone by one lapse of application or one failure to maintain procedural necessities.  It is far better to plan for and around difficulties than have to bear the costs associated with confronting them.  Early advice and action is just about always cheaper than the costs of dealing with things at the last minute.

Remember planning is one half, positive and consistent action is the other.  We are always happy to assist in such cases as we desire to avert calamity rather than confront it, but where necessary we will!