Using an appropriate business structure to best service the needs of your clients whilst maximising profit.
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One commonly used business structure which covers asset protection and provides the opportunity to maximise the business and family taxation strategy is the discretionary or ‘family’ trust.
Outlined below is a list of advantages to operating a business through a family trust with a personal or corporate trustee.
Asset Protection
Operating a business through a family trust can help protect your assets, as the assets held in a trust are not legally owned by the beneficiaries.
Keeping the trust assets separate from the personal assets of the business operators ensures the business assets cannot be attacked to satisfy personal debt.
Income splitting
Income splitting allows the trustee to distribute the business profits to trust beneficiaries at different levels.
The benefit of this is the tax saving that can be gained by distributing a greater amount of the profits to beneficiaries who have a lower income flow from other activities.
In the alternative, if the profit distributions threaten to push any of the beneficiaries into a higher taxation bracket, the trust can make a distribution to the corporate trustee, who will only be subject to the company taxation rate of 30%.
Asset transfer through generations
Assets are able to pass from one generation to another through a family trust.
Through a trust mechanism, assets can be transferred through generations prior to death.
It is important to choose the right business structure when setting up your business, if the wrong structure is chosen the cost implications can be severe.
Please feel free to contact our office to discuss discretionary or unit trusts, which may better suit your needs.
DISCLAIMER: this newsletter is not intended as legal advice; no reliance is to be placed hereon.