Starting a business can be daunting. Knowing what you want and need at the time is important.
Setting up a business involves: Business Name, ABN and TFN for the business.
The most common and necessary structure in Australia is a Business that is owned by a Trust with Company as the Trust.
This structure provides for asset protection, tax efficiency, growth in the business, future franchising to franchisees, as well as valuation, insurance and other benefits when you decide to sell or grow the business at a later time.
The benefit far outweighs the intial set up cost.
You must set up a company first and then create a trust deed with the company as corporate trustee. You will most likely be the director of your business and in a category or nominated beneficiary.
Once you have determined the legal structure where a company acts as the trustee, holding assets for the benefit of beneficiaries. It will then require registering the company, drafting a trust deed, appointing trustees, and opening a trust bank account.
The steps are detailed below:
1. Choose a Trust Type:
- Discretionary Trust:The trustee has broad discretion in distributing income and assets to beneficiaries.
- Unit Trust:The trust is divided into units, and beneficiaries hold these units as their investment.
- Hybrid Trust:Combines elements of both discretionary and unit trusts.
2. Register the Company:
- Register the company that will act as the trustee with ASIC (Australian Securities and Investments Commission).
- Obtain an ACN (Australian Company Number) for the company.
3. Draft the Trust Deed:
- A trust deed is a legal document outlining the rules and operation of the trust.
- It should specify the trustee, beneficiaries, trust assets, and distribution rules.
- Consider seeking legal advice from a trust lawyer to ensure the deed is properly drafted and compliant.
4. Appoint Trustees:
- The company you registered will act as the trustee, holding assets for the trust.
- The trustee is responsible for managing the trust’s assets and distributing income.
5. Open a Trust Bank Account:
- Open a separate bank account in the name of the trust’s trustee (the company).
- This will ensure the trust’s assets are kept separate from the company’s personal finances.
6. Register the Trust (if required):
- Some trusts may require registration with relevant authorities depending on the business.
- Consult with a legal professional or accountant to determine if registration is necessary for your specific trust.
7. Initial Asset Transfer (Settlement):
- The settlor (the person establishing the trust) must transfer assets to the trustee (the company).