Approach a small business owner and find out the following:
a. What is the legal structure of their business?
- Discretionary trust legal structure for an Accounting firm.
b. Why did they choose that business structure?
- The Tax benefits mainly
c. What factors did they consider before making the choice?
- Tax factors, legal considerations, protection against personal/family assets
d. What, in their opinion, are the legal risks involved in the type of business carried on?
- There are concerns that the business could be sued for negligence
e. What legal precautions did they put in place to protect their business and themselves against liability?
- Professional indemnity insurance - protection against being sued
- Company policies (Auditing firm): asking for letters of comfort from clients, not creating any assumptions in finishing the job; must have all the information.
- The way the Discretionary Trust is set-up, protects against personal assets if the firm is sued.
- Being in a Discretionary Trust also gives protection for the entity.
Analyse the information gathered under Part A as follows:
a. Identify legal principles studied in class that are applicable to the information gathered.
b. What other legal precautions/protection do you think the business owner should put in place?