Hi all…my first posting! (Although I have done a lot of browsing through the other postings)
My question is with regard to business structure. We have a partnership in our name, established for a current business. We are in the throws of setting up another two businesses, and also want to get into IPs (positive cash flow and renovations).
I am very concerned about going too far down the one path and having to undo everything at considerable expense. Should we be looking to establish a trust, with us as beneficiaries, with all our business interests and future IPs owned by that trust?
I take it that all of this can be done with one ABN number?
Is it possible to keep our exisiting ABN number for our partnership, and change it into a trust?
I am in the highest marginal tax bracket at present, and my partner is around 30%
So many questions….sooo little time
Regards
Dave[
]Hi Michael, thanks for the input [
]Current Business
This partnership is just that, isn’t it? Not a P/L? Just confirming.Yes it is a partnership rather than a P/L
New Businesses
These are using the same partnership, but different t/a names?Yes
So it would be the same ABN for all three businesses (or more correctly, three t/a names)?
That’s the way I see itIf they are not a P/L t/a three names, you are putting no real obstacle in the way of any possible litigation. If one business is sued, or if one of the partners are sue personally, it’s all up for grabs.
So a P/L with three trading names is regarded as 3 separate entities for litigation purposes?
Go for the single P/L with three t/a names for the different businesses as a minimum.
Better, I would have a trust that holds all assets for the P/L which rents or leases those assets with the partners as beneficiaries.
Ulitmately, the P/L is just a wokring business, money in, expenses out, no assets, 2x$1 shares. It’s like, “Sue me, you get nothing”.
It sounds a bit complicated, but good for asset protection etc. Would we need to submit tax returns for the P/L and trust? Apologies for the ignorant questions, but I have never set up a trust before, and therefore I am not that familiar with the concept.
Property
Setting up another trust just for your property invesment needs would not cost much and may give you added protection from litigation.Great
Thanks Michael
DaveHi Dave.
Generally speaking keep your property business in a separate entity from your other businesses. I agree with Michael’s suggestions as a starting point (and maybe a finishing point ).
I don’t see how you can ‘convert’ a partnership into a trust, or a company, for that matter!
Do a search in the archives for info about using trusts for asset protection; and also look at http://www.gatherumgoss.com.au. Dale Gatherum-Goss has a lot of supporters among property investors!
If you are in the highest tax bracket then I think setting up the optimum structure for your circumstances will more than cover any setting up and on-going costs.
TerryTerence McMahon
HomeWin
FinanceTo summarise:
1. The partnership should become a P/L which has all the trading names registered to it.
2. All business assets used by the P/L should be transferred to a discretionary trust and rented/leased back. Also, a trust has the 50% exemption on assets, unlike a P/L.
3. The partners, now directors, receive income from both the P/L as salary and the trust as distributions.
4. Use another trust for your property and other investments.So, one P/L, two trusts, minimum. Set up costs should be $1,500 onwards.
Thanks Michael for all the time you have taken to reply to me…I am at present following up your info with other searches on the internet..
You mention one P/L and two trusts..one for properties and one for businesses…I have a few questions…
1.[
] if a business ran into trouble, can assets of another business in the same trust, run by the same P/L be butchered by creditors? They would have the same ABN number I presume since the P/L would be common.2.[
] if a business ran into trouble, can assets of another trust (our property trust with cashflow positive properties) be touched if they have a common P/L trustee?Regards
Dave
]
] if a business ran into trouble, can assets of another trust (our property trust with cashflow positive properties) be touched if they have a common P/L trustee?The topic ‘Business Structure with other interests’ is closed to new replies.
