I understand and am in control of my business risks

• Diet, exercise and lifestyle balance
• Partner, family and friend support
• Colleague support
• Good business team
• Become financially savvy
• Knowing my risks

If starting out and I am the sole income earner, deciding on a business structure is easier. As complexity is added (such as multiple business interests, significant personal assets) then proper consideration of my structure is needed.

In any event I should discuss this with my Business Advisor.

Types of Business Structures include;

• Sole Trader
• Partnership
• Company
• Family Trust

What is a Sole Trader?

A sole trader is a person who goes into business on their own and;

• Usually, can begin trading straightaway without any formal process
• Uses their own IRD number for the business including income tax and GST
• Is the sole owner and is personally entitled to all profits but is also personally liable for all losses, taxes and debts

What is a Partnership?

A partnership is where two or more people join to run a business, usually;

• Based on a partnership agreement
• Share any profits or losses equally
• Liable for any debt within the partnership
• Needs to apply for a partnership IRD number including income tax and GST
• Does not pay income tax; it distributes income to the individual partners who then pay income tax

Company

One or more people can start a company. A company;

• Is governed by a shareholder’s agreement
• Is a separate legal entity from its owners
• Owns all assets and liabilities of the business and is responsible for any debts. Shareholders liability is limited
• Needs to apply for a company IRD number including income tax and GST
• Has increased compliance and administrative obligations including Companies Office and IRD

Why Consider a Family Trust?

A family trust is usually set up to protect family assets (home) and ensure that those assets benefit the people and the way in which I want. This is an important consideration for sole traders.

If it is set up and run properly the family trust will usually offer protection from;

• Professional liability
• Financial problems
• Relationship changes

Caution, a trust could be void if;

• Set up to defeat the rights of creditors
• Current couple’s relationship property has a negative impact on one of the partners
• Residential care subsidy when gifting rather than selling

If you are thinking about a family trust, then talk to a lawyer

• Ask for a no obligation meeting
• Think about what assets I wish to protect
• Who do I want to benefit (including myself or my partner) and how?
• Gifting process
• Make sure at the same time I sort out my will

Do I need a will?

• Why “How do I want to look after my family”
• When
  • Marriage or civil union
  • New business or Purchase major assets
  • Children are born
• Who … for the benefit of my family
• What
  • Distribute assets that I own
  • Special wishes or instructions
• How
  • A lawyer can draft a will
  • Easy process and in most circumstances are free

If I don’t have a will or if it is not updated, then ….

• Your wishes may not happen
• Access to assets can take longer
• May not be distributed in the way you had expected to your surviving family
• Instructions contained in the last signed will … will be used
• Upon marriage or civil union then any will in existence is revoked

ACC Levy Cover Plus (Nuts and Bolts)

• Agreed accident and keeps me from working
• Does not cover illnesses
• 80% income replacement based on what I pay tax on
• Contribution towards treatment and rehab
• Based on historical earnings

ACC Levy Cover Plus Extra

• I can determine what I insure for
• ACC Levy is then based on the cover chosen
• Full benefit of the cover (not 75%)
• I can set a lower level of cover and use savings to buy other insurance cover

Income Protection Insurance

• Income stream if I am unable to work
• Top up to ACC cover if an accident
• 100% usually for illness
• “Wait” period 4-8-13-26 weeks
• “Payment” period is return to work, 2 years, 5 years or 65 years old
• Monthly payment up to 75% of an amount chosen by me
• Premiums are 100% tax deductible, but income is 100% assessable

Life Insurance

• Chosen lump sum amount to be paid out in case of death or terminal illness
• Usually covers most causes of death
• Provides immediate cashflow requirements (living and debt) together with family life (study, house) and long-term help
• Indexed to protect buying power
• No cash or surrender value
• Premiums need to be kept up to date
• Requires evidence of health assessment

Mortgage Insurance

• Cover my mortgage repayments if I have an accident, illness (including terminal) or death occurs
• Usually includes repayment (chosen period of repayments) and life cover (balance of mortgage)
• Wait Period is “4 weeks”
• Payment period is 2 years, 5 years or term of the mortgage

Medical Insurance

• Quick diagnosis and treatment to return to work quickly
• Public system provides solution but is it quick enough
• To help cover major medical costs including specialist testing and diagnosis
• Access to private hospital treatment
• There is a pre-approval requirement

Asset Insurance

• Vehicle Insurance
• Equipment Insurance
• Clinic Insurance

Liability Insurance

• NZCOM membership includes liability insurance cover
  • Professional Indemnity Insurance
  • Public Liability
• Covers legal defence costs and awards to affected parties but not fines or penalties
• Significant savings of $2000 per annum and lower excess

Insurance Tips

• Talk to an insurance broker
• Check out all the options to reduce premiums
  • include choosing a higher excess
  • a longer waiting period
  • a shorter policy term
• Shop around and compare
• Buy only what’s needed
• Self-insure
• Look after myself and stay healthy
• Understand the value. Cutting costs is important, but it’s not all about premiums and price. What do I get for my money?
• As my circumstances change it is important to review my level of cover to make sure I am not under or over-insured