When starting your own business it is important to operate through a structure that meets your particular commercial needs and family estate planning both now and into the future.

For some people who want to start a business a trust may be the best choice. There are a number of benefits from operating through a trust including:

• flexibility to allow for changing circumstances with minimal costs and consequences;
• adequate asset protection for the people running the business;
• minimisation of taxes and other costs; and
• the ability to distribute profits efficiently.

Depending on the type and scale of business you intend to operate there may however be significant disadvantages and unnecessary complexity associated with using a trust. The set up and maintenance of a trust is complex and can be more expensive than a partnership or sole trader arrangement. There are also strict and heavy responsibilities placed on the ‘trustee’ of a trust. Profits that are not distributed might be taxed at the top marginal rate. Losses are trapped in the trust and cannot be distributed to beneficiaries. Understanding the effect of these considerations on your particular business will assist you in deciding whether a trust is right for you.

This Legal Guide on Trusts provides small to medium business owners with information about setting up a trust. Before making important decisions it is advisable to obtain legal advice specific to your situation. LegalEagle’s™ free directory profiles all lawyers in Australia. You can use it to Find a Lawyer near you.

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Warning: Information provided through LegalEagle™ is for general guidance. It is not legal advice. Laws and procedures referred to may change and differ between states, territories and nationally. There may also be important exceptions or qualifications. Only a lawyer providing formal legal advice can assess your particular circumstances to determine how the law will apply.