Trusts and business names

[Nominees]

OK this might be an obvious one but I just need someone to confirm my thoughts.

Can a Discretionary trust (or any trust for that matter) trade under a business name?

I am thinking of having a company as trustee for the ABC trust, trading as XYZ..

I think it is possible, and would make it a lot easier for people to right cheques. Is this correct?

Thanks,

Nom

 

[Sim]

The advice I was given was never EVER use your corporate trustee as a trading entity - basically destroys any chance you had of protection of your assets if someone decides to get litigous.

If you really want a trading business entity, you could simply register a business (not a Pty Ltd - just a business) owned by your trust. I think this is what you are trying to achieve - just make sure you structure it right.

 

[Nominees]

OK Thanks Sim.

The trust would be the entity trading under a business name NOT the trustee company. HOWEVER the trustee of the trust would be a trustee company.

Does this make any difference?

Or should I start a new trust with myself being the trustee and trade with that.

Just trying to work out the best approach.

Cheers,

Nom

 

[Sim]

No, what you described is what I meant - so it sounds like you are on the right path.

Some people might advise you to set up a new trust to be perfectly sure you have the best protection of your other assets. You would need to work out whether the costs are worth it.

If you were to start a new trust, you could either use your existing corporate trustee or start a new corporate trustee for maximum protection, but the costs in doing so will be significant.

The advice I was given was that initially at least, just use the same trust with corporate trustee setup as I already have, and if the company looks like it will actually do okay, then look at paying the price for a better structure for it - rather than going to all that cost up front before you have made any real money from the company.

This type of stuff needs careful planning and good advice from someone suitably qualified to give it !

 

[Nominees]

Thanks,

I would start up a new trust if I were to do this.

I guess the more fundamental answer I was after is whether a trust can have a business name of its own... (How to make it clear that it is the trust NOT the trustee company that is trading under another business name.)

I will give the department of fair trading a call tomorrow and find out.

Nom

 

[Sim]

If you look at the application form for applying for a new business name (downloadble from the net) it should explain what is expected fairly well.

Essentially, a trust does not "own" an asset - it cannot be the owner of a business name. It would be your coporate trustee (acting "as trustee for" your trust), which is the owner of the business name. How you document that trustee relationship I'm not sure - at minimum you would record that in the minutes for your trustee - not sure if it would also be on the business name application form - I'd suspect not.

Would be interested to hear what the DFT have to say.

 

[DaleGG]

Hi

I may be repeating what has already been said, but . . .

A trust can have a business name and this is usually registered in the name of the trustee company ATF the trust.

However, it is always important to separate businesses from investments and so it would be foolish to have a trust that owns IP's to also operate a buisness. Having two entities (one for each activity) is fine and common.

Dale

 

[Nominees]

However, it is always important to separate businesses from investments and so it would be foolish to have a trust that owns IP's to also operate a buisness. Having two entities (one for each activity) is fine and common.

This is what I was planning to do. It was really the business name for a trust that was troubling me.

Thanks to both for your replies.

Nom

 

[alpina]

i hope i understand this, but if you have a corporate trustee rather than an individual(s), is it true that under such a structure that you do not get the cgt exemption (ie, the 50% rule)?

also, in the situation where it is an individual trustee, is the possible the have the same person as the appointer, a trustee, and a beneficiary?

cheers,

julie

 

[DaleGG]

i hope i understand this, but if you have a corporate trustee rather than an individual(s), is it true that under such a structure that you do not get the cgt exemption (ie, the 50% rule)?

also, in the situation where it is an individual trustee, is the possible the have the same person as the appointer, a trustee, and a beneficiary?

cheers,

julie

Hi Julie

No, that is not true. A trust is a "flow through" entity and so the 50% exemption will apply.

It is not possible for the one trust to have the same person as trustee, appointor and beneficiaries UNLESS there are other people also involved as beneficiaries. Be careful of this please.

Dale

 

[alpina]

It is not possible for the one trust to have the same person as trustee, appointor and beneficiaries UNLESS there are other people also involved as beneficiaries. Be careful of this please.

Dale

Thanks for that Dale.

So its ok if I have my husband, future kids, brother sister, etc etc as beneficiaries also?

Julie

 

[Aceyducey]

So its ok if I have my husband, future kids, brother sister, etc etc as beneficiaries also?

Yes, so long as I get to be a beneficiary as well

You can have whoever you want as beneficiaries - but it's probably best not to have potential children as beneficiaries until they become actual children.

Cheers,

Aceyducey

 

[DaleGG]

Thanks for that Dale.

So its ok if I have my husband, future kids, brother sister, etc etc as beneficiaries also?

Julie

Hi Julie

Yes, that would make a difference.

Dale

 

[alpina]

Hi Julie

Yes, that would make a difference.

Dale

cool

so the real question for us will be to set up either a corporate trustee or an individual one. apart from costs, are there any other advantages that an individual trustee has over a corporate trustee?

julie

 

[DaleGG]

cool

so the real question for us will be to set up either a corporate trustee or an individual one. apart from costs, are there any other advantages that an individual trustee has over a corporate trustee?

julie

Hi Julie

I would recommend a corporate trustee because . . . amongst other things, if the trust is sued, it is actually the trustee who is sued and if the trustee is an individual, then, it is possible that their own private assets could be compromised and lost.

By having a company as trustee, you minimise this risk.

Dale