Structure: Own IPs and will open business

[Void]

Hi all,

I own a couple of properties under my name (no PPOR) and will open my own business this year as a side project while still being 100% employed at a financial institution.

This side project / business will be owned by two or three persons jointly (some have properties under their own name too or may be of foreign nationality).

I would like to understand the different options we have to structure this new business and would appreciate it if you either had a view or could point me to some background reading (I tried the search function but couldn't find any answers to my situation).

My main concern is around asset protection as I don't want to compromise my existing property portfolio.

Cheers,

Void

 

[geoffw]

I'd suggest you keep the business quite separate from your properties.

Even if there was an advantage in keeping them together, you would incur stamp duty and possibly CGT by transferring properties into another entity.

I ran my businesses, where there was some risk involved, under a family trust (one per business) with a corporate trustee (one per trust).

That was suitable for my affairs- but for something of this magnitude, you should get professional advice.

There's been some recent threads on this- search for either business, structure, or trust.

 

[RPI]

Interesting.

Will the side project own any real property?

Company- Shares to different owners, important that share agreement is drafted to guide the relationship. 30% tax on profit from first dollar. Downside is that shares as an asset can be attacked by the individual's creditor's, if shares are owned by trusts that may assist.

Unit Trust- flow through entity for tax, units to different owners, again units are assets that can be attacked. Units being owned by other entities may help

Partnership - no asset protection in either direction

Partnership of entities. maybe discretionary trusts with corporate trustees, or a mixture of entities

None of the above could be correct also.

Very hard to tell without really specific info.

Since you are in Syndey, why not see TerryW on this forum, he is a Sydney based lawyer who is a bit of a structuring guru.

regards

 

[Void]

Thanks guys for your pointers.

I'll keep on using the search function and I'll contact TerryW.

Cheers !

 

[Terry_w]

You should definitely use a company for the new business to limit liability. This could be a company in its own right or as trustee for a trust.

But the problem will be that you are likely to run into having to give a personal guarantee at some point - Directors of a company are usually required to give guarantees for leases, and credit arrangements such as advertising accounts, trade accounts, car leases etc.

So if your company fails and you are personally liable for outstanding rent then your personal assets will be at risk.