Setting up a Company
A company is an independent legal entity. All companies need to be registered through ASIC (the Australian Securities and Investments Commission).
You will run the business as a director and own the business as a shareholder.
- Your liability for the debts of the business is limited.
- Your limited liability can make it easier to attract investment.
- You can own and operate as the sole shareholder and director.
- You have no personal responsibility for debts unless the debts are negligent or fraudulent.
- A company can own property.
- You can be employed by the company
- Taxation rates can be more favourable
- You’ll have access to a wider capital and skills base.
- Large initial establishment fee.
- Complex establishment requirements.
- Strict regulations.
- Attract higher compliance costs than other business structures.
- Your business will be subject to company tax.
- Your financial affairs are public.
Setting up a Trust
A trust is a structure where a trustee (typically an individual or company) operates a business on behalf of the beneficiaries of the trust.
As a general rule, trusts are a more tax effective structure as a holding entity for investment and commercial real estate and other fixed assets. Individuals are provided a 50% exemption from CGT. This exemption will apply to a discretionary trust where the potential beneficiaries are all individuals (not companies).
- Often used for tax minimisation.
- Limited liability for each beneficiary (Asset Protection).
- Tax – Income splitting
- Can assist with transfer of assets to the next generation.
- The structure is complex
- The trust can be expensive to establish and maintain
- Difficult to make changes to a trust or dissolve it.
- The powers of trustees are restricted by the trust deed.
If you need assistance with a company or trust setup, contact us on (02) 9897 2426 and speak with one of our tax specialists.