Structuring for business

This guidance note summarises both the broad framework of most trusts and, specifically, the most common form of trust, which is a family discretionary trust.

Some of the other more common types of trusts are also considered.

See Business structures compared.

Advantages of trusts

Using trusts can give a business owner access to the following business and tax advantages:

• • limited liability;
• • access to the 50% CGT general discount;
• • flow through taxation of income to beneficiaries; and
• • flexibility in distributing income.

See Advantages of a trust.

Disadvantages of trusts

All choices of structure are compromises and each type of structure has disadvantages. Those applying to trusts include:

• • they can be complex;
• • they are more expensive to establish and maintain than some other structures, such as a partnership;
• • income must be distributed each year or maximum tax applies; and
• • losses remain within the structure and cannot be utilised by beneficiaries. This can be a disadvantage for a start-up business that generates initial losses.

See Disadvantages of a trust.

See Structuring for business.