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  • #979241
    Dennis Smechich
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    Hi All

    Have you thought of this? What would happen if someone was injured because of a service you provided, and then goes to sue you for everything you own?

    here are some things I could think of:

    – you’re a qualified masseuse and during the massage, somehow you injure someone during the massage.

    – You import laptop batteries from overseas and sell it here. One of them blows up and badly injures a customer (this was in the news 2 days ago).

    – Or maybe you gave advice and someone got injured because of it

    Now lets say for whatever reason the insurance company decides that they won’t cover you (which can easily happen). So now you risk losing everything you own (house, etc) because of the possible lawsuit?

    I’m wondering if people who jump to start a business have actually thought about the fact that you have a “lot” more at stake than simply the cost of setting up the business?

    Or is it ONLY me who is paranoid about this????

    Regards

    #1113012
    Paul B.
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    I wouldn’t say im paranoid but I am definitely cautious.

    It is vital that you understand your insurers PDS before you start operating as a business. I have heard some nasty stories and it is all because the person taking out the insurance policy did not bother to completely understand the terms and conditions of their policy.

    If it is causing you to lose sleep at night then I suggest setting up for limited liability.

    #1113013
    Kennethti
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    Well the simple answer to this is that these are all risks that a small business must take into consideration.

    You must at all times have the requisite amount of professional indemnity insurance and also take all due care and skill in relation to the provision of your services or your goods. Read your insurance PDS and understand what they will cover and what they don’t.

    If you are dealing with goods make sure that the manufacturer of those goods are easily contactable and will indemnify you for the products being sold. Bonus points if the manufacturer is Australian – it makes it a bit more difficult to run if you’re in the same country. If you’re the manufacturer, well, don’t sell faulty goods.

    Have guidelines. Have trainings. Be up to date in relation to safety standards. Take steps to essentially say, that when trouble rolls around, you did everything you could to ensure that you conducted your business in a professional manner and took all reasonable precautions. Now this doesn’t stop the lawsuit (people will sue people no matter how silly it is) but it may maximise your chances of winning or settling the lawsuit early.

    #1113014
    Dennis Smechich
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    Paul B., post: 126192 wrote:
    it is all because the person taking out the insurance policy did not bother to completely understand the terms and conditions of their policy.

    thanks, I understand this but I also know that most people no matter how much they think they understand their insurance policy, they dont know everything. Example is the floods in QLD. You may be covered for flood, but there are different “versions” of what a flood is.

    Remember insurance companies will fight to the bone to avoid big payouts, and that includes playing dirty eg. Saying that the flood was not a natural flood as it was a caused by a run off of water from the side canals.

    So what I’m wondering is, if the first line of defence fails (insurance), then what??

    #1113015
    Dennis Smechich
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    Thanks Kenneth. But even if you get top training or make sure you pick the best manufactures, sometimes sh$% happens. For example the battery that blew up and burnt the girl just a few days ago. The manufacturer could have top quality control, but sometimes, batteries do explode.

    but anyway, I’m not really concerned about the details of the incident because each is different.

    What I really wanted to know is what happens IF you are faced with a lawsuit AND the insurance company turns their back on you. Then you’re in trouble

    #1113016
    Kennethti
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    Well you’ve already answered that question. If the insurers won’t cover you then you’ll have to answer the claim in court by yourself, and justify why you aren’t responsible and that you took all reasonable care in making sure that your product/services were safe.

    That being said, depending on the circumstances you might consider suing the insurers for their breach of the contract between you and the insurer.

    To a certain extent by structuring your business properly you may be able to mitigate or reduce the risk. Ultimately however if your actions directly led to the loss suffered by the other party, then no amount of structuring can help you there.

    As discussed you need to make sure you do a good job.

    #1113017
    James Millar
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    That’s why an asset protection strategy is an important consideration when structuring your business. It can’t protect against everything (the law will look through a structure for some matters, gross or criminal negligence etc) but it can reduce risk significantly.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1113018
    Dennis Smechich
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    JamesMillar, post: 126219 wrote:
    That’s why an asset protection strategy is an important consideration when structuring your business.

    Thanks James. Interesting. Asset Protection. Is this something where you set up a PTY LTD solely for the purpose of separating your personal assets from business assets? And so if someone sues the company, then at worst, the company will declare bankrupt, yet still leave your house untouchable?

    #1113019
    bluepenguin
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    While you need to be cautious and make sure that you have the right insurances and business structure in place, it’s not worth stressing yourself out over hypotheticals.

    Whether you own a business or not, there always a chance something could happen that could make you lose your house. You could lose your income or be sued, inherit debt or be hit with a giant expense for some reason. If you think about it too much, it will break your brain.

    #1113020
    James Millar
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    Dennis Smechich, post: 126230 wrote:
    Thanks James. Interesting. Asset Protection. Is this something where you set up a PTY LTD solely for the purpose of separating your personal assets from business assets? And so if someone sues the company, then at worst, the company will declare bankrupt, yet still leave your house untouchable?

    Hi Dennis

    There are many different issues that could give rise to business litigation or criminal prosecution and each has different implications. General commercial matters would include customer disputes, staff disputes, competitor disputes, stakeholder disputes, compliance disputes (Govt, ATO, SRO, Council, Workcover), general public liability, family law settlements etc. Criminal prosecution matters would include things like gross or fraudulent non-compliance (Govt etc – especially ATO, Corporations Act and Workcover), any other gross negligence that causes damages or harm to third parties etc. – all within the business entity.

    Some of those items listed above contain “look through” mechanisms – but most don’t and can therefore be protected against by using an appropriate entity (such as a company).

    I agree with BluePenguin in that management of this risk can needs to be balanced against practical limitations (not everything can be predicted). Fortunately that’s what accountants and lawyers are for – analysing all the hypotheticals and minimising risk.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1113021
    Dennis Smechich
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    bluepenguin, post: 126231 wrote:
    …..it’s not worth stressing yourself out over hypotheticals…..

    …. If you think about it too much, it will break your brain.

    I KNOW!! its driving me nuts is holding me back from developing my business!

    Basically what i’m doing is selling a product here which I source from an Aussie supplier. I now want to import these things myself but that makes me the “importer” and therefore the manufacturer, and therefore liable for anything that goes wrong with it.

    Insurance said they would insure me for normal liability, but if the product causes cancer for example, then they wont cover me.

    I cant cant say what the product is yet, but lets take for example Protein Shakes. Lets say I import them here and as far as I know they’re safe. But 5 years on they’re known to cause cancer, then the lawsuits come and i’m up sht creek because insurance wont cover me.

    This liability thing is breaking my brain which is why i wanted to find out if any of these start up businesses have actually thought about these things. Or unless there’s some easy asset protection strategy that everyone knows how to do and I dont?

    #1113022
    Cjay
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    The right asset protection structures combined with an understand of your insurance policy (what it does and does not cover) will help you for the most part. Couple this with a concerted effort to make sure that what you’re doing is not going to harm others, you shouldn’t have to stay up every night worrying.

    #1113023
    AgentMail
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    Hi Dennis,

    Let’s say you walk out of your front door and get hit by a bus? This is just as likely to happen. Cover your backside of course, but don’t use it as a reason to stop proceeding with your business goals. Get the insurance as tight as you can, get your company structure set up professionally by an accountant, taking into account your concerns and needs.

    Then get out an do it. I would also think that, as the importer, not the manufacturer, the majority of the responsibility would fall back to them (as long as it meets normal AU/NZ specifications in the first place)

    Think about this – if you bought a chocolate bar from your local retail shop, and it turned out a piece of lead had broken off the machine and you ate it – who would you be sueing, the retail shop or the chocolate manufacturer?

    #1113024
    Dennis Smechich
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    AgentMail, post: 126301 wrote:
    Hi Dennis,
    I would also think that, as the importer, not the manufacturer, the majority of the responsibility would fall back to them

    its actually the responsibility of the importer. When you import the product, you’re classed as the manufacturer.

    Thanks AgentMail. You’re right. I will go out there and do it. Next step is to get my accountant to set me up properly under an entity of some sort.

    But honestly though, with it being very easy now to purchase products from overseas, I think there’s a whole bunch of people who simply buying goods from overseas and sell them here without going through the right channels and getting the appropriate certifications and approvals with no care whatsoever about liability. Maybe its time for me to start being a bit of a cowboy myself? :)

    #1113025
    chixfashionz
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    Dennis Smechich, post: 126188 wrote:
    Hi All

    Have you thought of this? What would happen if someone was injured because of a service you provided, and then goes to sue you for everything you own?

    here are some things I could think of:

    – you’re a qualified masseuse and during the massage, somehow you injure someone during the massage.

    – You import laptop batteries from overseas and sell it here. One of them blows up and badly injures a customer (this was in the news 2 days ago).

    – Or maybe you gave advice and someone got injured because of it

    Now lets say for whatever reason the insurance company decides that they won’t cover you (which can easily happen). So now you risk losing everything you own (house, etc) because of the possible lawsuit?

    I’m wondering if people who jump to start a business have actually thought about the fact that you have a “lot” more at stake than simply the cost of setting up the business?

    Or is it ONLY me who is paranoid about this????

    Regards

    It is worthwhile being paranoid. That way you will hopefully be more comprehensive in addressing risk concerns regarding your business. These days, the customer visiting the masseuse would only have to trip over in his/her house and lawyers will scramble to jump all over it.

    For those businesses where such risk is involved, it might be best to separate the operator from personal assets by use of company, trust or hybrid business structure. So long as fraud is not involved, personal assets can be protected to at least some degree. A good commercial lawyer can assist with this.

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