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Hi Sycon

Congrats on the qualifications. I have mates who have done the course, hard yards especially if you did it at night after being on the tools all day.

I have completed a heap of property developments through various entities and in town planning and property law deal with builders all the time.

Firstly, don’t listen to the negative buggers out there, I know plenty of boys still making great money. The ones I know who are struggling are those who do not know what the word marketing means.

If you have any assets (especially a house) or a planning to have them I would not suggest using either your own name or a company where the shares are directly held by you.

1. Own name.- unlimited liability,

(a) anything goes wrong, debt getting sued etc in the building business, all your personal assets are fair game too.

(b)Also opposite, something goes wrong personally and your business is an asset so it is fair game for a personal creditor to try and sell it.

2. Company with directly held shares (ie in someones personal name, you for example)

(a) anything goes wrong, debt getting sued etc in the building business and only the money that is tied up in the company are fair game, your personal assets are safe unless you provided personal guarantees as director etc

(b) something goes wrong personally and your shares in the company are an asset so it is fair game for a personal creditor to take your shares and therefore become the owners of the company and all its assets.

3. Company with indirectly held shares (ie owned by a discretionary trust)
2(a) still applies
2(b) above can’t apply and as long as the discretionary trust does nothing else, shares are pretty safe

4. Discretionary trust with Company as Trustee
If you do not need to specifically have a company run the business, this can be an even better option, especially due to the ability for flexible tax planning and that trusts don’t have the 30c in the dollar tax on the first dollar of profit (ie individual beneficiaries have tax free threshold)

Depending on the state you are in, your will need to meet certain liquidity and asset requirements for your builder’s licence. That may affect your choice of entity and can be why a company with shares held by DT works better for builders in some states.

This is only general information and not legal advice, which you need to get. You should also get some decent word document subcontractor contracts done up so that you are covered. Also be very conscious that the ATO is right into building contractors and subbies over personal services income breaches at present.

Good luck