1. Important: Please read our guidelines and tips for new players before posting, particularly if this is your first time. If looking for answers, start with a search of past topics.

How to use a Family Trust to run a business?

Discussion in 'Money matters' started by pink.moon, May 1, 2009.

  1. pink.moon

    pink.moon New Member

    Messages:
    1
    Likes Received:
    0
    Trophy Points:
    1
    Hey, does anyone know the steps to set up a trust? If i would like to keep my business assets separate from the business and divide the business income between each family member, do i need to create 2 trusts? One to hold my assets and one to run the business.

    Thanks. Hope someone can help. Hoping to learn more about trusts before setting one up with my accountant.
  2. Adam Randall

    Adam Randall Member

    Messages:
    382
    Likes Received:
    3
    Trophy Points:
    18
    This is how we setup ours:

    1) Picked up phone
    2) Asked accountant to set it up.
    3) Paid about $800 for company and trust setup.

    Things like that do require expertise, it sounds like you already know what you want, the technical details should probably be left up to the accountant.

    There are some books on recommended setups, from memory I think holding your company within a trust was one of the safest ways to run things, but thats coming from someone who has trouble counting to 10 unless I am bare foot or wearing sandles.
    Last edited: May 1, 2009
  3. KarenC

    KarenC Well-Known Member

    Messages:
    1,662
    Likes Received:
    613
    Trophy Points:
    113
    I do not have a trust nor do I know anything about them, but I found these links really helpful in understanding them.

    Written by Nick Renton AM who is an Australian authority on trusts and many other law matters.
    This is the link to the page about family trusts
    http://users.bigpond.net.au/renton/942.htm

    http://users.bigpond.net.au/renton/ (main website)

    http://users.bigpond.net.au/renton/101.htm (about Nick Renton)

    You have to scroll down a lot of the pages, but there's a wealth of information there.
  4. Hugh Thyer

    Hugh Thyer Member

    Messages:
    157
    Likes Received:
    3
    Trophy Points:
    18
    Make sure you check out the Personal Services Income rule.

    If you're the one earning the money, the money will have to come to you. You can't distribute it to anyone you like under certain circumstances.

    Get an accountant to advise you properly.
  5. Dardee

    Dardee Active Member

    Messages:
    375
    Likes Received:
    31
    Trophy Points:
    28
    I run my business through a family trust and have a company as the trustee. The benefits are flexibility with distributing the income but you do need to be wary of the personal services income rules. If you are running a genuine business and have a number of clients/customers then you are probably ok but it is best to speak to an accountant.
  6. Angus

    Angus New Member

    Messages:
    21
    Likes Received:
    0
    Trophy Points:
    1
    In general, it's a good idea to separate business assets and the trading entity into different trusts. Having a company trustee as you have already done is also a good idea for asset protection. Whether you can distribute income flexibly between family members will depend on the nature of your business. You need to seek professional advice so your own circumstances are fully taken into account.

    Angus Morrison
    CEO
    Lift Business Growth Systems
    Level 1, 290 Coventry Street
    South Melbourne VIC 3205
    www.liftbusiness.com.au
    03 9092 9424
    0447 407 576

    ABN 99 065 724 852

    Liability is limited by a scheme approved under Professional Standards Legislation.
  7. The Cafe Ninja

    The Cafe Ninja Member

    Messages:
    125
    Likes Received:
    3
    Trophy Points:
    18
    My accountant has helped me with all of this and I'm happy to recommend him - www.yunari.com.au. His name's Darren Cowell.
  8. yunari1

    yunari1 New Member

    Messages:
    2
    Likes Received:
    0
    Trophy Points:
    1
    Pink Moon:
    Generally best approach is to house business assets in a trust and run the operating business in a separate company structure.

    You can link the two entities such as having the trust own 100% shares in operating company. But that will depend on your particular cicumstances as to whether that is appropriate.

    Best to get an accountant setup structures, but you can use someone like Reckon Espreon for "off the shelf" service, such as trust deeds, company shells.. I find them excellent.

    Btw I am a chartered accountant and tax advisor.

    Cheers,
    Darren
    www.yunari.com.au
  9. ruselrones

    ruselrones New Member

    Messages:
    3
    Likes Received:
    0
    Trophy Points:
    1
    Setting up a family trust can give a small business owner a multitude of planning opportunities with potentially large advantages......Dividends can be paid from the family business corporation to the trust and these amounts can flow out to family members in need......
  10. saoirse

    saoirse New Member

    Messages:
    11
    Likes Received:
    0
    Trophy Points:
    1
    Dont underestimate the importance of a small business / asset protection lawyer.

    Your accountant is the place to start to advise you on the most appropriate structure but i'd always recommend taking legal advice on the structure itself rather than relying on your accountant to set it up for you.

    Ask your accountant if he works with or knows a lawyer who can prepare the necessary trust deeds, etc. Accountants might be able to do it for you but they might also not be up to date on all the legal aspects.
  11. King

    King Well-Known Member

    Messages:
    1,935
    Likes Received:
    406
    Trophy Points:
    83
    I was at the lawyers today (don't know when they changed their name from solicitor) and their recommendation, in conjunction with our accountant is:

    Use existing family trust as shareholder - this allows disbursements of income (or set up a trust if you don't have one)
    Set up company - this provides the protection of your assets. I will be director as I have least assets.

    Setting up a company is $970 - quoted today.
  12. saoirse

    saoirse New Member

    Messages:
    11
    Likes Received:
    0
    Trophy Points:
    1
    That's a good price too - is that just the lawyer's professional fees or does that include the ASIC fees to set up the company as well (or the purchase of a shelf company)?

    The only additional level of protection you could get would be to set up a second trust to be the director of the company, as directors can be held liable for company debts in some circumstances. You mentioned that you have the least assets but whatever you have could still be at some risk (important to consider as the biggest asset most people usually hold in their personal name is the family home).

    But the other thing to consider is that if you borrow money from a bank and even on most rental agreements, leases, etc. the lender is going to ask for director / trustee guarantees on the company's debt anyhow so there is always going to be some level of risk but much less that if you held it all in your sole name (and without the tax benefits of income splitting).

    PS - there were big changes in the legal profession in 2007 which aimed to standardise terminology and structures across each state jurisdiction - the term 'lawyer' became popular after this time (though solicitor is still acceptable). And yes, i am a lawyer, but i'm not giving advice here - just some background information. Ah, lawyers, always covering their butts...
  13. saoirse

    saoirse New Member

    Messages:
    11
    Likes Received:
    0
    Trophy Points:
    1
    The other thing i should mention is that you also create administrative problems for yourself when you get too creative with your structures.

    I have two business with companies and trusts set up to protect my personal assets but its absolutely crazy trying to stay on top of all the reporting and tax obligations like maintaing the records, accounting and other costs - not to mention the time spent in doing so.

    It's sounds like your advisers have recommended a good middle ground between asset protection and future administration.
  14. King

    King Well-Known Member

    Messages:
    1,935
    Likes Received:
    406
    Trophy Points:
    83
    the $970 includes asic costs ($400). Not got the final bill, but this was the price given verbally

Share This Page