Asset protection for entrepreneurship

Discussion in 'Legal Issues' started by Ole, 14th Dec, 2018.

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  1. Ole

    Ole New Member

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    Hi fellow investors! Wondering whether anyone’s been in a similar situation to me & can advise how to solve it please? I’m a full-time mum, own PPOR in my name (no mortgage), which is 90% of my wealth. No income. Interested in starting a business by renting out parts of PPOR to raise capital - including the use of part of the home as business premises operated by a third party. Gross rents expected to be max. 1% of PPOR value, so not enough to warrant a stampable transfer of the PPOR (eg into trust). Worried I might lose house if bitter tenant sues for any reason and the house is just in my name. Would love any advice please! Thank you!
     
  2. Bonz

    Bonz Well-Known Member

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    You don’t really give any details of the proposed use of your home by the tenants. That said if you have the appropriate local authority approvals for the proposed uses, and then you make sure that the tennents execute the appropriate leases, a clause of which would include providing you with certificates of currency for insurance policies to cover risk, then I believe your risk profile would be very low.

    Make sure you disclose your proposed activities to your insurer as well.
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Get some legal advice. There are several things that can be done to improve your chances on any future bankruptcy, but you have to consider the clawback provisions and the estate planning effects.

    Beware of 'asset protection' seminars
     
  4. Marg4000

    Marg4000 Well-Known Member

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    Beware of insurance issues. Make sure you get good advice and are adequately covered. Simple home insurance is not enough if a business is involved.

    Even if the business carries its own insurance, in some circumstances you can be held liable. And there is nothing to stop someone including you in an action or claim.

    This is particularly concerning if the business includes people coming to the home, e.g., massages, beauty treatments, consultations etc. If they fall or trip on the premises, you will be the one who is sued.
    Marg
     
  5. Greg McDonald

    Greg McDonald Active Member

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    WOW. Who are you, where do you live and let me trip over in your front yard please!

    (a) you can transfer your property into a trust (i.e. take out a mortgage or lein against it) WITHOUT triggering stamp duty... just saying...

    (b) you'd be best to start a business and claim every last cm2 of floorspace it uses, plus every kw of electricity and more. Yes business insurance - that's half the reason! Why? Because it ***** all over normal insurance.

    (c) get a tenant in STAT. Get out of the PPOR tax trap and make that an investment property. Tax deductions. Be smart. Unless you are in love with the place, move out, rent your dream home, and rent your real home out.

    (d) PM me if you want help or directions to official sites showing you how to do these things. This stuff is easier than you think. You don't need expensive asset protection from seminars. You don't need expensive lawyers for insurance. You don't need expensive accountants to rent to tenants.

    If you can read and write, you can pretty much do it yourself. Yes you need real estate agents to sign proper stuff when buying/selling. Yes you need lawyers to sign documents when doing whatever. Yes you need an accountant to lodge your tax officially. But most of the real work you can do yourself and it's simple and easy - the government literally gives you the guidelines and forms and HELPS you.

    1 - raise capital by mortgaging against the property...

    2 - start a business anyway...

    3 - rents are what you make it...

    4 - idea: consider AirBnB... its a business and a tenant solution. OMG!

    5 - You are very smart for being astute enough to realise that you are currently in a vulnerable situation so far as the current house/financial/legal circumstances you are in. That's fantastic! Congrats, honestly and sincerely. Now please, do something about it! Read, learn, ask - you have already taken the first step by asking here... please do continue!!! Good honest hardworking real people get ****ed over by being 'setup incorrectly' such as your paid off PPOR being in your name is concerned so please keep going and take action and implement something to protect yourself!
     
    Last edited by a moderator: 28th Dec, 2018
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I have reviewed legal documentation for someone who paid about $8k for this and the strategy was full of holes. No meaningful instructions were given to the client and no mention of the clawback provisions in state and commonwealth legislation.

    Merely 'taking out' a mortgage won't work.
     
    Propertunity likes this.
  7. Fargo

    Fargo Well-Known Member

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    Greg. How do you get a mortgage without income ?
     
  8. Trainee

    Trainee Well-Known Member

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    Assuming a 1m ppor, rent is 10k a year. Worth it? What are you currently living on?
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    That's easy. Borrow money from a related party and offer a property you own as security.
     
  10. Greg McDonald

    Greg McDonald Active Member

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    Exactly. You can 'mortgage' your PPOR for, quite frankly almost anything, and any amount, and they have first dibs if you are sued. It's one of the most common tricks in the book.

    Where people go wrong is they mortgage their property to a Company they or a related party are a Director of...

    Seriously look into it.

    I don't know what the rules of advice etc are and I am NOT giving any advice at all.

    I'm just saying... I'd setup a hybrid discretionary unit trust for $120... mortgage the property to the trust... sell/disperse the units appropriately to parties/investors whatever you like to call them. Then get to it - rent out a room using AirBnB, start making your house make money for you...

    I'd run the business under the trust, and have proper insurance (which means, get good insurance, and also... If I was one of the parties I'd be wanting to have an appropriate security interest against my investment in the units) but, that's just me.
     
  11. Mike A

    Mike A Well-Known Member

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    M
    What if the business was sued and the insurance didn’t cover the event or the event resulted in damages more than the insured amount ?

    The trust would then have a loan which would be an asset secured over the property and that property is now at risk.

    Merely taking out a mortgage or lien against the property doesn’t transfer it to the trust. It just creates an asset to the trust and a loan to the holder of the asset.
     
    Last edited: 28th Dec, 2018
  12. Greg McDonald

    Greg McDonald Active Member

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    Look, your the
    BCOM MCOM MTAX DIPFP CPA CTA Registered Tax Agent
    and I'm the Bogan from Logan...
     
    Terry_w likes this.
  13. Mike A

    Mike A Well-Known Member

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    I’ve met “bogans” who know more than me many times before. My biggest client was a “bogan” who grew up in housing commission. Learnt a hell of a lot more from him than any degree.
     
  14. Greg McDonald

    Greg McDonald Active Member

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    Then I recommend you transfer your domain ownership to a seperate identity. Yes I know it's annoying you cant put WHOIS privacy on .com.au's but anyways, separate that off. The boys down at Digital Pacific are fantastic. Still make sure you have cloud backups and downloaded backups of your website. Also, change your admin page login to something different than wp-admin ... and I'd recommend you install a basic text captcha for logging in too. If you use 5 logins and your locked out you can just be DDOS'd and never be able to login to your own site. Most people won't waste time on captcha's... especially if they had to go looking for the admin login page to start with. That's all I'm going to say. Classy graphics BTW.
     
  15. Mike A

    Mike A Well-Known Member

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    Thanks. See i told you some new learnings.

    I installed 2 factor authentification to the admin login so for the moment that at least provides some further level of protection. Wp-admin now moved so good luck for someone to find it

    Who said bogans cant teach the educated.
     
    Last edited: 28th Dec, 2018
  16. Greg McDonald

    Greg McDonald Active Member

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    Two-Factor authentication? Serious? What plugin did you use? I'm curious... is it a softapp on your pc or phone or an email or an actual txt?

    Honestly, that's a $9/month service add-on right there. Please do let me know...
     
  17. Mike A

    Mike A Well-Known Member

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    Last edited: 29th Dec, 2018
  18. Greg McDonald

    Greg McDonald Active Member

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    RE OP: Research Indefeasibility of Title
     
  19. Greg McDonald

    Greg McDonald Active Member

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  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Not sure how this is relevant?