About legal expenses, and what is tax deductible, and what isn’t tax deductible. What we’re now going to do is go through all the legal processes that you need to take on board and implement in your immediate strategy plan, to minimize and manage risk.
There are so many risks that investors need to consider when they approach any property deal whether it is commercial, residential, or investment, and whether they are the buyer or the seller. There are obviously different levels of risk and they come from many directions.
If you’ve got personal risk when you go into any kind of deal that you need to consider, there are tools to manage these sorts of risk. In terms of relationships, it could be your personal and also your business relationships. So, if you’re tied in with a partner and you’re about to do a property deal, you need to consider whether you are bringing that person on board or whether you are going to guard this deal away from them? Maybe you are looking at a Joint Venture, in which case you need to look at the contingent liability ofthis process. How close are they to bankruptcy? How likely are they to be sued by another source? How does it affect the deal that you’re going to go into? There’s all of that background, not only yours, but the other party’s as well if it’s going to be a JV agreement.
Death is a personal risk for everybody. Things like insurance can actually mitigate part of your personal risk there. It’s the same with accident trauma and disability. If you’re going into business arrangements, particularly if they’re long term business arrangements and one person is essential to the business, protection via even short term life insurances that protect the profitability of the business that you’re going into are important. If for example you are going into a hairdressing business and your partner is the hairdresser and you are going to do your apprenticeship with him, he/she is essential to the business – you can’t go cutting someone’s hair if you don’t know which end of the scissors to hold. So, all of those types of factors really need to be taken into account.
When buying a property, it is your lawyers that you rely on to point out the worst case scenario. They always look at the worst situation that could possibly happen and put systems in place to protect just in case.
Business Partnership Risk
There is risk if you are going into business with other people. If you are doing a joint venture with other parties, you need a joint venture agreement.
One thing that Lawyers should do, is they give you a joint venture checklist. It’s highly recommended that you get that and go through it. If you’re doing any sort of joint venture agreement, it gives you a guide to all the questions you should ask yourself. What I recommend you do, is you go through the checklist and from there, you write it all out so you’re both very clear about what each party has agreed to do in the joint venture, sign it at the bottom, and then take it to the lawyers and say, “Please write this up properly and make it legal.” It probably won’t even amount to any extra fees. It’s like with your accountant, when you bring in a box of receipts and go, “Here you go.” Well, it takes time to assemble/dissemble all that stuff.
Similarly, with your joint venture agreement, if you have thought about your recipe, and not left your solicitor to decipher and tease it out of you, you have saved a lot of time, effort and money.