Have a trust? You need a corporate trustee

A trust structure has certain advantages for your business, including the ability to split income and protect assets. Many businesses, however, fail to appoint a corporate trustee and instead may rely on ‘natural persons’.

Simply put, a corporate trustee just means that a Proprietary Limited company is the registered trustee. Here are some of the advantages of using a corporate trustee:

As the Proprietary Limited Company is a separate legal entity, its assets are separate from your personal assets. This affords your business greater legal protection.

1. As the Proprietary Limited Company is a set legal structure, it offers more certainty in business succession planning.
2. The Proprietary Limited Company is able to own the assets of the business and thus any changes in the relationship of the parties to the business does not necessarily affect the business trust itself. New people can more easily be incorporated into the business structure.

For instance, two women may run a sports business. They may use a trust structure to split the income of the trust between themselves and their respective families to take advantage of personal income taxes.

Smith and West Sport Pty Ltd may be the trustee of the business trust. Both of the parties could be directors of Smith and West Sport Pty Ltd and if Smith and West want to bring in new parties to the business and continue to use their trust structure, they can easily make them directors of the company without needing to change the title to any of the trust structure’s assets.

If you have further questions, please contact us at frank@franklaw.com.au

This is not legal advice. 

Written by Tim Cargill & Zdenka Marinov and edited by Andrew Graham.