How to use a Family Trust to run a business?

[King]

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.

[saoirse]

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...

[saoirse]

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.

[King]

the $970 includes asic costs ($400). Not got the final bill, but this was the price given verbally