A company is a separate legal entity from the owners. It can sue and be sued in its own name separate from the person who owns it. It has limited liability for its debts. A company can either be a public company like BHP or AMP (Ltd) or a private company (Pty Ltd).
A company is run by its directors. It is owned by its shareholders.
Can you give me an Example?
Let's assume that John Smith sets up Smith Pty Ltd. John Smith makes himself the director who runs the company. His wife Mary Smith is the shareholder.
John Smith Pty Ltd enters into contracts in its own name. It is liable for the debts. Apart from some exceptions, John Smith is not liable for the debts of the company; only John Smith Pty Ltd is liable for the debts. And Mary Smith is not liable as she is a shareholder and has limited liability, ie. limited to the amount of unpaid amounts owing on her shares.
I have heard that a Company is a great way to Trade Options or Buy Property as tax is limited to 30%. Do you agree?
A company does have some benefits.
However, there are some problems with companies. To give three examples:
Ultimately it does depend upon circumstances. Arrange Your Free Initial Chat with our Specialist and we will see if a company will work for You. But in our view, a trust is usually the better way to go to trade the stock market or buy property.
In our view, You should set up a company only in four situations:
If You purchase the company with a trust, we have package deals for traders and property investors, or for traders and investors who buy multiple structures. Contact our Tax Specialists NOW to receive more information.
Should I set up my Company before Trading or Buying Property?
Most certainly! Once You start doing things a certain way, it becomes harder to change it later on. There are rules about changing Your business structure to avoid tax or stave off creditors. It can be done, but it is more expensive and more risky.
So, contact us NOW and we will get things moving for you!
I already have a Company which I use for my Business. Can I just use that?
Definitely not! If someone sues you in your business, all assets in the company are at risk. You must do your trading in a separate company, otherwise all your trading capital is at risk if you get sued in Your business.
What is a Trust?
A trust in its simple form has a settlor, a trustee, and beneficiaries. The settlor sets up the trust. The trustee manages the trust property (investments, assets, etc.) and pays out any net income for the benefit of the beneficiaries.
Let's give a simple example of a trust. I transfer my car to You as I am going away for 3 years. During that time, You can drive it, do what You like with it. But after 3 years, You must transfer the car to my mother. We have a legal agreement. This is a trust. I am the settlor (as I created the trust), You are the trustee (as you are holding the car on trust for my mother) and my mother is the beneficiary (as she is beneficially entitled to the car and could sue you if You decide not to give the car to her down the track in 3 years).
However, at Wealth Safe, we use family discretionary trusts. These are similar to the above but the characteristics are slightly different. To explain, the Settlor is an unrelated party, the Trustee is a company or Yourself, and the Beneficiaries are all Your family members, companies, trusts and charities. As the Trustee You can distribute the profits and the trust capital to whoever You want to, and in what proportions You want to distribute, that is, on a discretionary basis, as none of the Beneficiaries have a fixed entitlement or interest in the trust funds.
Click Here for more information about family trusts, and how they work.
What are the elements of a discretionary trust?
It is fairly involved but to explain the main characters in a discretionary trust:
The Trustee is the legal owner of the trust property and not the beneficial owner. That is, in the car example above, the trustee's name is on the car registration papers, but legally the trustee does not own the car. The car is held on trust for the beneficiaries. The trustee carries out all transactions of the trust in its own name and must sign all documents for and on behalf of the trust. The trustee's overriding duty is to obey the terms of the trust deed and to act in the best interests of the beneficiaries.
The Settlor is the person who creates the trust by "settling" the initial sum of money to be held on trust for the beneficiaries. This is usually a nominal amount such as $10 to keep stamp duty to a minimum.
The Trust Fund is all the money and property held in the trust. This includes the settlement sum, accumulated income and any other money and property held by the trustee pursuant to the terms of the trust.
The Beneficiaries are the people (including entities) for whose benefit the trustee holds the trust property. The beneficiaries do not have an interest in the assets of the trust. Beneficiaries are eligible to receive a distribution of income or capital at the trustee's discretion. For example, in a standard discretionary trust, Fred Smith (as trustee) may hold the money and property on trust for his wife and children (who are the beneficiaries).
The Appointor is the person who calls the shots. The Appointor can hire and fire the Trustees. The Appointor is the really important player in the trust.
The Trust Deed defines the relationship between the trustee and the beneficiaries in a document setting out the rules and terms of the trust.
Some trusts also have a Guardian as well as an Appointor.
Do I need a trust to trade or buy property? Why not use a company?
In our view, there are only four situations where you should set up a company:
Why would I set up a Trust?
Apart from the four situations above, trusts are the best structures to do business, especially stock market trading or property investing. Trusts have some wonderful advantages:
Do Trusts have any weaknesses?
Yes, but only two weaknesses:
Apart from those issues, a trust is the best structure.
Can you give me an Example of how a Trust works?
I set up a trust (as the settlor) with Fred and Mary Smith as trustees. Fred and Mary have 3 children, 2 children under 18 and a 20 year old son (who earns $25,000 per annum).
Fred and Mary put $500,000 into the trust and trade options with it. They make $150,000 profit in the first year.
Fred and Mary can distribute the profit to themselves, to their children, their favourite charity, a family company, or to a mixture of all of them in any proportion they so desire.
For example, assume that Fred earns $100,000 (is on the top marginal rate) and Mary earns nothing. They may distribute as follows:
The tax savings are quite substantial as compared to Fred trading in his own name or even in Mary's name only.
Do Trusts protect my assets?
Most certainly! Contact us NOW and we will help You set up trusts which will protect Your assets. We have some great structures we can implement immediately to protect Your assets and ensure that if Your business does get sued, Your personal assets remain secure. We even have some incredible techniques to protect Your business goodwill and business assets. For more information,
We also have package deals if You require multiple trusts for business or property buying, or for any other specific purpose. Should I set up my Trust before Trading or Buying Property?
Most certainly! Once You start doing things a certain way, it becomes harder to change it later on. There are rules about changing Your business structure to avoid tax or stave off creditors. It can be done but it is more expensive and more risky. Contact our Tax Specialists to assist You with restructuring NOW
I already have a Trust which I use for my Business. Can I just use that?
Definitely not! If someone sues you in your business, all assets in the trust are at risk. You must do Your trading in a separate trust, otherwise all Your trading capital is at risk if You get sued in Your business.
If You have already started trading in Your business family trust, come and see us immediately and we will arrange a trust split, ie. we "cut" the trust in half to create two separate trusts, with minimal stamp duty and no capital gains tax.
How do I get More Information about Trusts and their Benefits?
Read our blog on the benefits of a trust. Click Here
Or else take advantage of our FREE INITIAL CONSULTATION at Wealth Safe to help you understand our services, and how we can do your tax returns for you and save you THOUSANDS of dollars in Tax to KEEP the MONEY you MAKE.
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Brilliant service!! Could not have asked for a better start to getting my business structure. This world is still completely new to me and I am very impressed with all the resources Warren and the entire team at Wealth Safe have provided to help me understand trusts
Living overseas, with no structures or assets in Australia anymore, it simply didn't make sense to keep paying into their tax system. Thanks to Warren and his team, they guided me through the process of setting up stable business structures, and making sure all the lawyers agreements and professional advise was documented. This ensured I met the obligations of the ATO and was 100% legally compliant with my obligations. I researched my options, and felt secure that WealthSafe took all precautions to ensure I was doing the right thing, and benefitting financially at the same time
After getting so much conflicting advice from other sources, we were completely confused. Being global business owners, we needed both Australian and international advice, so we reached out to War ren to help us understand exactly how we could structure our businesses to ensure we were well protected. It was vital to us that our future growth and decisions were taken into account. Not only did Warren give us the highest quality advice, and go above and beyond in ensuring we understood the full spectrum of what we were putting in place, but he has always been available for follow up questions, is always happy to get us on the phone for clarification, and he has shared the expertise in his team with us. At first, we have to be honest, we were really concerned about spending money on a consultation. The outcome is although not cheap, it is the best money we have ever spent. We can see significant savings, know we are structured well, have a fully dedicated and professional team behind us and have expert advice available when we need it. We can’t recommend Warren and the Wealth Safe team enough. Thank you
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They were able to walk me through the whole process, even a tax dummy like myself.... I was very very impressed with the level of service. It was really end to end. They were always there to answer questions, help me complete paperwork and connected me with all the right people. I can't recommend Warren and Wealthsafe highly enough Full Review Here
Virna, Warren and the Wealth safe team have provided us with a professional and efficient experience helping us to identify and create a customised financial structure to suit our needs. They clearly have a great deal of knowledge regarding taxation in Australia. Also Warren's seminars have been of great help. We absolutely would recommend their services and are forever grateful for help and advise provided
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I worked with Warren Black to open a Hong Kong corporation during the summer of 2018. Warren came highly recommended from my business contacts, who said that he was honest, trustworthy, and very knowledgable. I have to agree. My experience working with Warren was very good. Warren was extremely attentive to my questions, replying with solid answers in less than a day. He also took the time to explain options and rules in detail. When faced with some unique challenges that most businesses don't face, Warren was quick to roll up his sleeves, take action, and even put me in touch with his team so the process could move forward rapidly. This was above and beyond what I expected. To top it off, I found him very personable and really a pleasure to work with. If anyone is looking at a business entity in Hong Kong or Malta, I highly recommend Warren Black.
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