Doing Business under a pty ltd or trust vs personal name

[rodimus]

Hi

Please discuss:

When doing business (lets say marketing a product online via a website), is it any safer doing it thru a company or trust compared to doing it in your own name?

I have read somewhere that as director of a company we are responsible for some things such as financial liabilities of the company. But how about legal responsibilities in terms of business?

I am planning to do a website marketing/distributing products, and I have a unit trust that is empty and not doing anything, so i thought i might register it under my unit trust name (or the trustee company name). At least this way the tax is only 30% instead of my personal tax of 42%. This trust doesn't hold any properties, as I hold property under another hybrid trust.

 

[coastymike]

Who holds the units in the unit trust as the profits are flowed out of the unit trust into the unitholders hands and they are assessed on the profit. Better to run a business through a discretionary trust than a unit trust unless you hve other participants or want to bring in other people easily at a later stage.

 

[rodimus]

How about if my Hybrid Trust (which holds 1 property) also owns the units in my unit trust. Then can I juggle the income a bit more flexibly?

I assume this way it wouldnt jeapordize the security of my property in the hybrid trust, will it?

 

[PrimeCommercial]

I have read somewhere that as director of a company we are responsible for some things such as financial liabilities of the company. But how about legal responsibilities in terms of business?

Gday, A pty/ltd company offers more protection of your assets than a trust.
Directors of a company are NOT liable for company liabilities unless they have acted illeagally or given personal guarantee's to a particular person/company.

I have a retail shop which is owned by a company that I am a director of.
Some wholesalers will not give me an account unless I provide them with a personal guarantee.

 

[coastymike]

It could however jeopardise your business. Let's say you are found to be negligent for whatever reason as trustee for the hybrid trust which manages the property and the tenants launch a successful suit against you. The trustee then has the right to be indemnified against the assets of the trust which include the units in the unit trust. These then have to be sold (which would mean selling your business) to pay out your creditors. Better to setup a new structure from the beginning than possibly exposing your business to a lawsuit from tenants.

 

[rodimus]

ok say if i use the trustee for the unit trust to do the business, (leaving the unit trust alone), that means the unit trust has no activity. How long can the tax deduction within that unit trust be brought forward to offset against future income if no activity and no tax return for a few years?

I know some people are asking me to use a Discretionary Trust, but i really have no-one to distribute the income. Most of my family members live overseas..... I understand that if i distribute income to them as beneficiaries then there is a witholding income tax of 10%(?) for non residence ?

 

[tubs]

I'd keep in mind that this sounds like a fairly low risk venture. Its not like he's setting up a plastic surgery clinic.

 

[evand]

Mate, sounds like you're tying yourself up in knots and getting ahead of yourself here.

Register a sole business name and trade with that for a while until you know you've backed the right horse.

Then when the business is a sure thing and your income grows consider company's and trusts.

Years ago i told my accountant i wanted a trust with a corp trustee for protection, tax benefits, yada yada and he had a laugh and said

"you wouldnt believe how many people fall for the old trust thing"

I was a bit insulted at the time but now i realise he was dead right. Trusts etc are advanced structures that a lot of small business people and investors pay too much to set up and maintain unnecessarily.

Eventually i did set one up but it was much later and only for IP investing, not business.

ok say if i use the trustee for the unit trust to do the business, (leaving the unit trust alone), that means the unit trust has no activity. How long can the tax deduction within that unit trust be brought forward to offset against future income if no activity and no tax return for a few years?

I know some people are asking me to use a Discretionary Trust, but i really have no-one to distribute the income. Most of my family members live overseas..... I understand that if i distribute income to them as beneficiaries then there is a witholding income tax of 10%(?) for non residence ?

 

[plasticsman]

Mate, sounds like you're tying yourself up in knots and getting ahead of yourself here.

Register a sole business name and trade with that for a while until you know you've backed the right horse.

Then when the business is a sure thing and your income grows consider company's and trusts.

Years ago i told my accountant i wanted a trust with a corp trustee for protection, tax benefits, yada yada and he had a laugh and said

"you wouldnt believe how many people fall for the old trust thing"

I was a bit insulted at the time but now i realise he was dead right. Trusts etc are advanced structures that a lot of small business people and investors pay too much to set up and maintain unnecessarily.

Eventually i did set one up but it was much later and only for IP investing, not business.

If my accountant was to laugh like that, he would be fired so fast he wouldn't know what hit him.

You're the entrepreneur. You're taking the risk. You call the shots.

Sure, there may be a better way of achieving what you want to achieve, so explain to your accountant the reasoning behind your ideas, and he may be able to suggest a better solution.

But to have an accountant dismiss you just because you're a forward-thinking "small business"... he can take his $4.99 Kmart shoes and walk on home to his miserable, mediocre existence. I would purposely bring up his name at every CEO/business networking meeting I went to for the next 50 years just to shame his sorry excuse of a practice.

Pardon me, but the successful people in my life just don't think like that. Nor would they allow someone who dismisses ambition so swiftly to be on their team.

Thankfully, the people that I work with are excellent in every way.

IMHO, there is no reason why ANYONE should leave themselves personally liable from a legal standpoint when conducting ANY business of a commercial nature.

 

[PrimeCommercial]

If my accountant was to laugh like that, he would be fired so fast he wouldn't know what hit him.

My accountant laughs at me all the time...and ignores me and tells me what to do....Dont do that! Put your clothes in the basket! wipe the stains off the toilet!

If I didnt know any better I'd divorce her ar5e.

 

[evand]

Too many accountants (and other professionals) will take your money and say yes to everything. They not only make money setting this stuff up for people but make stacks maintaining and consulting for all these entities. Money for jam for these guys, they can see the punters coming. This one didn't because it wasn't necessary.

He was a successful, good accountant so i didn't mind too much. He was (and is) right.

I had bigger fish to fry than to carry a little grudge like that through my career. And fry them i did.

If my accountant was to laugh like that, he would be fired so fast he wouldn't know what hit him.

You're the entrepreneur. You're taking the risk. You call the shots.

Sure, there may be a better way of achieving what you want to achieve, so explain to your accountant the reasoning behind your ideas, and he may be able to suggest a better solution.

But to have an accountant dismiss you just because you're a forward-thinking "small business"... he can take his $4.99 Kmart shoes and walk on home to his miserable, mediocre existence. I would purposely bring up his name at every CEO/business networking meeting I went to for the next 50 years just to shame his sorry excuse of a practice.

Pardon me, but the successful people in my life just don't think like that. Nor would they allow someone who dismisses ambition so swiftly to be on their team.

Thankfully, the people that I work with are excellent in every way.

IMHO, there is no reason why ANYONE should leave themselves personally liable from a legal standpoint when conducting ANY business of a commercial nature.

 

[plasticsman]

My accountant laughs at me all the time...and ignores me and tells me what to do....Dont do that! Put your clothes in the basket! wipe the stains off the toilet!

If I didnt know any better I'd divorce her ar5e.

Hahaha... Touché!

 

[Sunfish]

I could like Evan's accountant. Sounds the sort of answer a mate of mine would have given (sadly past tense).

Mrs Fish and I still have everything as a partnership after a lot of years. My motorbike and her car are all there is done differently. Like Shady I have a built in accountant (not as bossy though ) so costs have not been a big factor in the decision either.

 

[PrimeCommercial]

I Like Shady I have a built in accountant (not as bossy though )

She not that bad really, i have to keep her anyway, she gave me this earlier in the year

 

[johnduncan2]

Too many accountants (and other professionals) will take your money and say yes to everything. They not only make money setting this stuff up for people but make stacks maintaining and consulting for all these entities. Money for jam for these guys, they can see the punters coming.

Some of the smarter ones joined forums and drummed up business through their posts and contribution. This attracted a helluva lot more business for them which not only increased the value of their business, but enabled them to sell out and retire early. Others haven't retired yet but business is good and hopefully they'll be able to retire sooner than they thought

 

[evand]

And/or write books on trusts to give the impression that trusts are the perfect investing vehicle for an investor that owns 1 x 3br home in Logan with 90% LVR.

Writing books adds immeasurably to ones professional credibility and therefore drums up business.

Most professionals who write books dont do so for the money. Well they do indirectly as the books lead to lots of business.

Posting on forums (with your business in your sig) and writing books for credibility and exposure are both common ways of attracting business in an under the radar way.

Some of the smarter ones joined forums and drummed up business through their posts and contribution. This attracted a helluva lot more business for them which not only increased the value of their business, but enabled them to sell out and retire early. Others haven't retired yet but business is good and hopefully they'll be able to retire sooner than they thought