Setting Up A Trust Account for your business
Trust fund setup for businesses is similar to trusts for families. It involves a trustee (an individual or a company) carrying on business operations for the benefit of other people (the beneficiaries). A trust is set up through a formal deed which outlines how the following trust fund will operate.
Two main trust types are available to you:
- Discretionary trusts: The following are trust fund setups where the trustee gets to decide how the profits of a business will be distributed among the beneficiaries. With a discretionary trust, you can expect tax-related benefits, protection of assets, estate planning and land holding benefits.
- Unit trusts: When interest in the trust is divided into units. The distribution of the profits is therefore calculated by the number of units a beneficiary holds.
How do trust fund setups work?
Trusts, unlike companies, are not separate legal entities. The trustee of the business trust is the legal entity who owns the business assets and enters into contracts on the trust’s behalf.
Trustees are responsible for the operation of the trust. As a result, they are legally liable for the debts of the trusts. If the trustee is a company (a corporate trustee), this can reduce liability. Trusts can be tax effective strategies for your business, due to their flexibility on their income and asset distribution.
If you’re running your business through a trust, it should involve a trustee and the following factors: owning and operating a business’ assets, distributing a business’ income; and complying with the trust deed’s obligations.
The features of a new business setup include:
- Requires the trusty to undertake annual administrative tasks
- Possess its own tax file number (TFN) and ABN
- Must be registered for GST if its annual turnover exceeds $75,000
- Beneficiaries may be liable to make Pay As You Go (PAYG) installments on distributions they receive
- It must pay super for any employees.
Trust fund setups for businesses are expensive to set up and complex to understand. You need sufficient time, the right skills and the assistance of a licenced professional to ensure everything is set up correctly.
Before choosing your new business trust, we strongly advise you to get in touch with a Verus solicitor or accountant. Require assistance? Our financial advisors have the expertise and wealth of knowledge in accounting, SMSF and tax services. Challenge us with your financial issue and we can find a new business setup is most financially beneficial to you, and best suits your personal circumstances.