The Keys to Structuring your Business Correctly

In order to best protect assets and have flexibility with cash flow and paying the right amount.

Basic strategies

  • Minimise exposure to risk:- (eg don’t try to take out risky behaviours in business or personal life)
  • Insure against risk (take out the right insurances)
  • Avoid owning assets in entities where risk is attached.

Asset protection of common structures

  • Sole Trader – No asset protection
  • Partnership – If individuals – no asset protection
  • Company – High level asset protection – risk quarantined to company. Shareholders other assets protected. But be mindful of insolvent trading – director’s may be at risk.
  • Discretionary Trust – In business use corporate trustee for asset protection. High level asset protection.
  • Unit Trust – High level same as above.
  • SMSF – Very well protected.

Typical Mum & Dad situation – where business succession isn’t likelihood

Type of structure:

Discretionary trust (Corporate trustee). ‘High risk’ spouse is director of corporate trustee. ‘low risk; spouse is the shareholder. ‘high risk’ spouse owns no assets. Assets & house in the name of ‘low risk’ spouse or a trust or SMSF if investment.

Company structure for the trading entity recommended in the following situations (discretionary trust hold the shares):

  • Arm’s length parties going into business together for a medium to long term growth goal. Eg not a short term joint venture.
  • Income and profit is projected to be above $180,000 per family group from day 1.
  • In Queensland you need a QBCC license. I find QBCC work easier direct with company structures than trusts (less of a need for a deed of covenant)
  • Succession planning where parties can easily enter & exit the business at will and not have to pay stamp duty for the goodwill the company has generated. (If just buying, selling & transferring shares)
  • 5% tax rate now applicable which is great for the working capital of the company.

To learn more about how to structure your business correctly contact tim@ctbs.net.au or (07) 3267 2111.