A business trust is not necessarily a unique structure of its own accord. It is in effect a variation on the standard family trust scenario albeit there are additional components included to ensure your business structure provides you protection, flexibility and tax-effectiveness all in one.
People structuring their businesses through trusts need to make careful decisions around a number of different areas including:
Debt Structure – Personal or family funds which are advanced to provide start-up or working capital for the business should be structured in a manner which affords maximum interest deductibility for interest costs, as well as appropriate security. To this end, the use of documented credit facilities between owners and business, as well as utilisation of General Security Agreements can provide both of these.
Fit with other structure – A Business Trust should be structured so as to fit well with the other structure owners may have. While it is common for Business Trusts to hold the majority of shares in trading companies, it is sensible to consider the appropriate beneficiaries for the Business Trust, as well as where flexibility should be provided to enable distribution of profits to owners in a tax-efficient manner.
Once appropriate consideration has been made of these different factors, a business trust can be structured to provide the solid structural platform to build your business off. We also suggest it is extremely important to get your structure implemented earlier in the piece rather than later, because this helps allay any possible issues around chopping and changing structure purely for tax purposes and allows the business to grow within the protected trust before any asset increase occurs in personal names.