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Like most business people in New Zealand, you probably have your entire personal wealth tied up in a few key assets, such as the family home, car(s), beach house and/or rental property, investment accounts and shares/bonds.

Many businesses, sometimes through no fault of their own, get into financial difficulty and end up owing considerable sums. Receivers and Creditors are relentless at seeking their money and if your personal assets are not protected, they can be seized to pay business debts.

It is critical for your personal assets to be kept separate from any business dealings. The best way to start protecting your assets is

to have the business set up as a Limited Liability Company. The term "limited liability" means that the liability (risk) of the shareholders is limited to the amount of money they have put into the business. This differs from other business structures, such as the Sole Trader or Partnership, whereby the shareholders liability usually extends to include all of their personal assets too.

In an upcoming article, we will examine Family Trusts as a way of further protecting your personal wealth, however the minimum first step for any small business person is to set themselves up as a limited liability company, which is cheap (around $300 - less on a HomebizBuzz special deal) and easy to do (usually completed in a day or two). Unless you behave illegally or negligently, you will instantly reap the benefits of enhanced asset protection for yourself and your family.

Tax Minimisation
If you were to add up what you pay in PAYE and/or Company Tax, GST, import duties, council rates, petrol taxes, school fees, alcohol taxes, and even the tax on lotto tickets, and if you are a high-income earner (over $60,000 per annum) in New Zealand, you will be paying around 65% of your income in taxes!
Low-income earners pay around 45% of their income in taxes.

That means, as a high-income earner, you may be working from 1st January to 24th August each year for the government. For free!

The sad fact is, there is very little you can do to avoid paying this level of tax. Avoidance might land you in more financial difficulty, or even in jail!

Smart business owners concentrate less on tax-avoidance and more on tax-recovery. It is critical that you position yourself to claim back the maximum amount of tax each year. Some tax-recovery is simple, such as claiming GST paid, the cost of employing staff etc. Some tax-recovery is not so obvious, but equally important.

A visit to a good accountant or tax advisor will pay dividends as you prepare your plan.

Here are some questions to ask yourself:

• Do I have the best possible business structure to take advantage of tax deductions?
• Am I claiming for the space I use at home in order to run my business, including a portion of the rates, insurance, mortgage interest, repairs, electricity, etc?
• Am I claiming work-related home costs such as internet connection fees, child-minding costs and vehicle expenses?
• Am I claiming my travel expenses when I combine personal travel with business travel (ie: attending a seminar, researching a market, networking with other business owners)?
• Am I splitting income amongst shareholders in order to take best advantage of lower tax rates?