If you are looking to setup a trust arrangement to run your business, buy a property or for any other reason, then there can be several facets they you may be unaware of. Forming a trust can be complex as compared to other straight forward business structures like companies or partnerships. Overseeing this complexity of forming and managing a trust, it is worthwhile to note that there are numerous benefits of trading under a trust structure.
The primary benefit is but not limited to is the optimum manner in which the trust is taxed. The profits are distributed on to its beneficiaries in a flexible manner and they get taxed according to individual tax rates and hence generally there is zero tax payable for the trust.
Trust is a legal relationship between the Trustee and the Beneficiary where the trustee operates for the benefit of the beneficiaries, the profit is distributed among the beneficiaries but they do not have any control over the operations of the trust. As the role of a trustee is very challenging, it is very important to understand the legal obligations and duties of being a Trustee. Another crucial aspect while forming a trust is to understand the Trust Deed, since the business can operate only based on the conditions outlined in its deed.
The right trust type can be decided on the basis of your business needs.
Family Trust:
An option of forming a Discretionary Trust commonly known as Family Trust is available where the family members can be a part of the trust by availing the title of Beneficiary or trustees. The transfer of profits to beneficiaries is flexible in nature.
Unit Trust:
A primary feature of a Unit Trust is that it can function like a Company where the shareholders are replaced by unit holders. The transfer of profits to beneficiaries is proportionate to the units held by each beneficiary.
Hybrid Trust:
The Hybrid Trust is a combination of Family Trust and Unit Trust where from the point of view of beneficiaries, the profits can be transferred partly based on the units held by beneficiaries and partly flexible in nature.
Please note that this is just a bird’s eye view on the features of a trust and has many more dimensions to it.
Do not hesitate to call us now for more information and/or to determine the suitability of setting up a trust arrangement for your business. Alternatively you can fill out our online trust formation form and submit your details and we will get back to you with an update.