Tool Box
Issue No. 47 - June/ july
Family trust - how it benefits SMEs
by Mr David Garry
Establishing a business from a start-up position or acquiring an existing business is usually done with a view to long-term success in the form of sustainable income, ongoing wealth creation and building an asset which has a resale value when the owner exits the business.
Before you embark on the journey it is imperative to get appropriate advice to enable you to create a business structure which suits your current and long term objectives. A commonly used business structure which covers asset protection and provides the opportunity to maximize the business and family taxation strategy is the discretionary, or ‘family’ trust.
There are several advantages to running a business through a family trust with a corporate trustee.
Asset Protection
Asset Protection is a major attraction for operating a business through a family trust, for the reason that
assets held in a trust are not legally owned by beneficiaries. Keeping the trust assets separate from the personal assets of the business operators ensures the business assets cannot be ‘clawed back’ for private default borrowings.
Income splitting
Income splitting is an entitlement which allows the trustee to distribute the business profits to trust
beneficiaries at different levels. The benefit is the tax saving that can be gained by distributing more of the profits to beneficiaries who have a lower income stream from other activities. If profit distribution t...
