Keep you and your company separate

Discussion in 'Business Accounting, Tax & Legal' started by Terry_w, 28th Jan, 2017.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    A few years ago one of my clients who was running a business through a company as sued personally - both him and his wife even though he was the sole director.

    This happened because they failed to keep a clear distinction between themselves and the company.

    They were sued by another company with which their company was doing business. There was talk about a joint venture and the other company incurred costs which they sued my clients for.

    On examination of the situation it was discovered that the following issues contributed to them being personally sued:
    • my clients company didn't have a bank account,
    • Didn't have a separate email address,
    • Wife was at meetings
    • they used words such as 'my', 'i' when they should have been saying 'My company', 'us' etc
    • they used the wrong words on receipts
    • they used the wrong ABNs
    • There was no accounting for the company done
    • no tax returns, ever, done
    • the director did the work
    • the company didn't have its own telephone numbers
    • No written agreements between my clients company and them
    So at end of the day it looked like they were sole traders. There was little in the way to indicate there was a company involved.

    Moral of the story: Do all that you can to keep the company separate from your self personally.
    Such as"
    - separate bank accounts
    - separate email addresses
    - signature footers on emails indiciating it is in your capacity as part of the company that you are replying
    - don't bring non- directors or non staff into meetings
    - have written agreements - in the company name
    etc etc
     
    Redwing, EN710 and AJP like this.
  2. abbyfresh

    abbyfresh Well-Known Member

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    Great points raised. Lots of potential grey areas on how you are meant to operate under a company and as a director and too many other perceptions and assumptions that can be raised if / when it comes to the crunch. In cases like this it can often reduce the purpose and value of having the company in the first place.

    There is never 200% separation and overlaps can be found in most smaller operators if you look deep enough right?
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    You should do everything possible to distance yourself personally from the company. It can be difficult but you should try!
     
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Alter Ego....
     
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  5. AJP

    AJP Well-Known Member

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    Thanks for this Terry - super useful information when first starting out
     
    Terry_w likes this.