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James Millar
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estim8, post: 204556 wrote:
I’m no accountant, so happy to be contradicted … but my understanding is (and the main reason I use a trust) that it enables the distribution of funds from the company without having to be an actual employee of the company and have all the additional admin associated with that.

I’m a solo operator, so running a payroll and reporting etc, just for me is a pain.

Sort of correct but some clarifications

1. The trust makes the trust distribution – even with a corporate trustee. When a stand alone company names a distribution of profits its called a dividend.

2. The main benefits of a discretionary trust are (a) legitimate income splitting with the exception of PSI and (b) asset protection (c) to a lesser degree substituting remuneration of related parties from wages (above the line) to distribution of profits (below the line). As you say this avoids the employment related compliance. However care needs to be taken with this because some states calculate payroll tax on the basis of inclusion of substituted distributions (so that entities cannot avoid it with use of trust).

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