SEQUESTRATIONS

TIPS FOR PROTECTING PERSONAL ASSETS WHEN YOUR BUSINESS FACES LIQUIDATION

You do not start a business with the notion that it will fail in a few months or years. However, thousands of businesses fail every year. Creditors liquidate many, whilst the owners liquidate others. That being said, liquidation is foreseeable and business savvy people take precautions to avoid being sequestrated when their business is liquidated. Far too many sequestrations accompany business liquidations, and the heart-breaking part of it is that so many of these could have been avoided, had the business owners taken proactive steps to protect their assets.

What to do

Do not become part of the statistics of compulsory sequestrations when your business faces closure. Follow the guidelines below to protect your assets.

Do not marry within community of property

If you are married in community of property, you share an estate with your spouse. This means that you both owe assets together and are liable for debts together. When it comes to sequestrations, you will thus lose all the assets you own together, and that is everything both of you have.

Never register company assets in your personal name

Many start-up business owners do not want to go through the red tape of having to register assets in their company names. To avoid sequestrations when businesses fail, it is important to distinguish between business and personal assets. Do not register vehicles, computers, electronics, buildings, phones, or any assets of the company in your name. Separate your assets from those of the business. If your business faces liquidation, your assets will then not be considered as part of the estate.

Avoid Signing Surety for The Business

This can be difficult but, wherever possible, avoid signing surety for any of the business debts. If you do, your personal assets cannot be protected. You have then agreed to stand in for debt owed by the business, and debt collectors therefore have every right to come knocking on your door.

Never Register Personal Assets in Your Name

This may seem contradictory, but you should also not register any personal assets in your name. Place all your valuable assets in a trust to protect against sequestration. Keep in mind that the trust must be properly managed.

Get Help from Professionals

Make use of the services of attorneys, tax consultants, and accountants, and ask their advice to structure your business assets. Get legal guidance about liquidations and sequestrations if your business shows signs of distress.


Disclaimer: Information is relevant to the date of publishing and is not intended as any form of legal advice. Please call on our attorneys for legal guidance, rather than relying on the information herein to make decisions – December 2017.