Business setup

[hysterical]

Not sure if this is the place for this but here goes....

A couple of us (friends) have decided to get into business together and we have a few IPs held in our own name.

Would like to ask
1. What is the best business structure to be setup so that our personal IP are not being liable for anything on the business front ?
2. What is the best ownership structure for the business ?

Thank you

 

[RPI]

Would need way more info.

BUT

if a company or unit trust was the entity operating the business then it is a good idea to have a share holders or unit holders agreement outlining the conduct of the parties and further that each party hold their shares or units through a discretionary trust that is limited in what else it can do (eg it can't operate a business, own IP, take on debt or do anything risking)

Company or trust with corporate trustee provides good asset protection from top down but not the other way. Shares and units are assets, so if the people you go into business with get into trouble with creditors or litigation etc you may find yourself in business with an unrelated party. Using a DT to hold the shares stops that happening.

 

[Terry_w]

Darryl has given a good summary.
Yes definitely a company in there as the legal entity as this will limit liability.
Consider 1 director to limit the need to give personal guarantees. Non director should consider the effect this has on the loss of control. Consider all possibilities that can go wrong with directors being liable. One easily one is insolvent trading. Not keeping proper leads to a presumption of insolvent trading = personal assets could be at risk.

Each person should probably consider owning their shares via a discretionary trust. Consider asset protection of these shares.

Using a unit trust to run the business offers additional benefits such as secrecy ? unit holders are not publically searchable. ASIC have no jurisdiction (except over the trustee company) and it is easy to transfer unit holdings with no need to notify ASIC. Income can also retain its character as it flows through.

Also consider the trading entity may not be the best entity to hold assets such as names, domain sites, machinery etc. These may be owned by another entity and licenced or leased.

Then consider the structure of the trusts. Consider asset protection issues internal to the trust ? beneficiary attacks, loss of control, bankruptcy, death, loss of capacity of the indivudals behind it etc.

 

[Paul@PFI]

Darryl has given a good summary.
Yes definitely a company in there as the legal entity as this will limit liability.
Consider 1 director to limit the need to give personal guarantees. Non director should consider the effect this has on the loss of control. Consider all possibilities that can go wrong with directors being liable. One easily one is insolvent trading. Not keeping proper leads to a presumption of insolvent trading = personal assets could be at risk.

Each person should probably consider owning their shares via a discretionary trust. Consider asset protection of these shares.

Using a unit trust to run the business offers additional benefits such as secrecy ? unit holders are not publically searchable. ASIC have no jurisdiction (except over the trustee company) and it is easy to transfer unit holdings with no need to notify ASIC. Income can also retain its character as it flows through.

Also consider the trading entity may not be the best entity to hold assets such as names, domain sites, machinery etc. These may be owned by another entity and licenced or leased.

Then consider the structure of the trusts. Consider asset protection issues internal to the trust ? beneficiary attacks, loss of control, bankruptcy, death, loss of capacity of the indivudals behind it etc.

I don't advocate transferring trust units. In some states its dutiable. Instead its easier to redeem units and issue new ones.

I also like a class discretionary trust BUT it has issues if a partner wants out or new ones come in. I often find franchise businesses with 2-3 owners who are unrelated its a good fit. Its got characteristics of a fixed trust but its still a discretionary trust. So Partner A and B share in a fixed % of income. They can then distribute to respective families like disc trusts but they have just one. If they later sell (that why I said franchise - they often do startup then sell to someone else) the cap gains can be streamed to family too. Have a pizza hut client who has had 10 stores at some point. Now with 5. He loves it. He and his mate build then sell shop front stores that way. A whole family business for them both.

 

[hysterical]

Thanks all for the response.

Hi Darry, what do you mean by good asset protection from top down but not the other way around ? Can you elaborate?

Finally would you use the same disc / family trust via different corporate trustees to own different proprietary limited companies ?

Thank you

 

[Terry_w]

Thanks all for the response.

Hi Darry, what do you mean by good asset protection from top down but not the other way around ? Can you elaborate?

Finally would you use the same disc / family trust via different corporate trustees to own different proprietary limited companies ?

Thank you

I would use the same discretionary trust with same trust to own shares in multiple compnies. Subject to your succession pl?n on death.

 

[hysterical]

I would use the same discretionary trust with same trust to own shares in multiple compnies. Subject to your succession pl?n on death.

Thank you Terry

You mean same disc trust with same trustees ?

Succession planning is to pass down to bloodline

Any changes ?

Thank you