• Choosing the most appropriate trust structure for your ongoing business needs is a complex decision taking into account many different areas of the law including taxation, estate planning, trusts and equity. The trust structure you decide on can impact the profitability of your business and family wealth growth for decades to come.
• Any decision about whether to use a trust and which type of trust structure to use should be based on advice given by a lawyer who understands your particular business and family estate needs. You can look for a lawyer who specialises in Trusts in our free Find a Lawyer directory.
• The two most commonly used business trust structures are discretionary (family) trusts and unit trusts.

1. Discretionary family trusts

• Discretionary family trusts are most commonly used in family businesses.  The main advantages and disadvantages of running your business through a discretionary family trust structure are:

• depending on the tax law in your state it is usually the most flexible in terms of reducing tax among the group of beneficiaries as the trustee can decide when and how much trust income and assets will be distributed to which beneficiaries to enable tax minimisation across the group of beneficiaries;
• land tax thresholds are lower than for individuals;
• it provides an effective asset protection mechanism if your family or business holds large value assets as none of the beneficiaries legally own any assets.  Assets are owned by the trustee meaning trust assets cannot usually be obtained by creditors in the event of a bankruptcy. The trustee can simply use their discretion to not distribute to the beneficiary facing bankruptcy at that time;
• it can be designed to be flexible to meet changing circumstances. For example the words of the trust deed can ensure that any future children or grandchildren will become potential beneficiaries even though they may not yet be born. The trust deed can also accommodate divorce and re-marriage;
• however it may not be the most appropriate structure for investments focused on negative gearing as losses can't be distributed to beneficiaries and are trapped within the trust; and
• the discretion of the trustee to distribute or not distribute to particular beneficiaries can fuel disputes if the family unit is under pressure and relationships are tense.

      B.Unit trusts

• Unit trusts are most commonly used for non-family businesses, multi-family businesses or businesses that are run for the benefit of both family and other non-family investors. The main advantages and disadvantages of running your business through a unit trust structure are:
• the units in a unit trust operate in a similar way to shares in a company. In a company the shareholders hold shares. Property and assets in a unit trust are divided into a number of defined ‘units’ that are held by the trustee for the benefit of the 'unit holders'. The units reflect your share in the trust like a share reflects your investment in a company;
• like shares these units generally have a pre-determined value. A fixed number of units that represent a certain percentage of business profits can be assigned to different types of beneficiaries including non-family members. This means beneficiaries (unit holders) who hold more units are also entitled to a greater share of the income or capital;
• like company shares a unit trust can have different types of units that have different legal rights;

• a unit trust can be established where some of the unit holders are discretionary family trusts.  This means set units or interests in the trust income and assets can be distributed to discretionary family trusts.  The trustee of the discretionary family trust can then make distributions to family members who are beneficiaries;
• it is cheaper to set up a unit trust than a company and it is more flexible;
• the unit trust can borrow money and carry on a business; 
• it can be a more effective investment vehicle as it is possible for investors to purchase 'units' in the trust and become 'unit holders' with a beneficial interest in the income or assets of the trust;
• it is relatively easy to transfer the units and for the trustee to re-acquire the units;
• the trustee of a unit trust has limited discretion. The distributions of profit are determined by the unit entitlement of each unit holder;
• however asset protection may not as efficient as with a discretionary family trust.  Unlike the beneficiaries of discretionary trusts who have no defined proprietary interest in the trust property a unit holder will generally be considered to hold a proprietary interest in the units that they own. If a person is made bankrupt their units will be treated like any other asset and sold to pay creditors. An exception to this rule may exist where the unit holder is a discretionary trust itself.