Unit Trust or Company??

[Dianna W]

Hello, I have enjoyed reading through many of your threads. I am about to step into the world of being a small business owner and believe that I will be spending alot of time on here

So the situation is I have worked in a Real Estate Agency for some time and I am buying in at 50% with the current owner. Now I have arranged with a solicitor to have a discretionary trust registered. Now the consideration is wether to operate the business as a company or unit trust. My new partners accountant has suggested company however my solicitor advised not to disregard the unit trust.

As mentioned ownership will be at 50% each, and we are scheduled to have an agreement drawn which will include my purchasing the business outright in the near future.

My new partners accountant has also requested an ACN - is this possible for me to obtain with my discretioinary trust?

Do any of you have any advise in regards to this. I am booking an appointment with an accountant of whom which I will delegate as my accountant to also discuss further.

.... any other pointers would be greatly appreciated!!!!

[TaniB]

Hi

I'd love to be able to clarify things a bit for you. You've mentioned a few different things going on here so I'll answer the easiest first - A.C.N. is an Australian Company Number and is only issued to companies. You will however be able to get an A.B.N. for the discretionary trust. (I presume this is what you mean when you say you're getting a discretionary trust registered.)

How is the business running now? i.e. what are you buying half of? Or when you say 'whether to operate the business as a company or unit trust' do you mean you and the current owner are looking at starting a fresh legal entity together?

A very common arrangement is to operate a business as a discretionary trust with a corporate trustee. Broadly, the trustee is responsible for the trust debts which is why most business people choose to have a corporate trustee.

The company operates as the trustee and 'holds the business interests' on trust for the beneficiaries (i.e. you, or members of your family, or other legal entities if the trust deed specifically allows for it). This discretion as to who receives income can be used to make distributions in the most tax effective manner.

Unit trusts don't really operate as tax minimization vehicles since profits are divided according to how many units are held.

I hope this helps clear up a few things.

Good luck

TaniB