Trust business structure
Business Basics, Managing Teams, Start Up / New to Business

Is a Trust Business Structure right for you?

A Trust business structure is where there is an obligation imposed on a person (Trustee) to hold property or assets (such as business assets) for the benefit of others (Beneficiaries).

The trustee is legally responsible for the operation of the Trust and you may have a company act in this role.

Most Trust business structures are what are termed ‘discretionary Trusts’. This means that no beneficiary has a fixed ownership interest in income or capital.

The Trust must distribute any net profits or capital gains to beneficiaries each year, who then pay tax in their personal capacity. Failure to properly distribute profits can result in the trustee having to pay tax at the highest marginal tax rate.  There are also requirements for funds to flow to beneficiaries within certain timeframes of distribution, for trading entities this can become difficult as cash is often utilised as working capital and tied up in business assets.

A Trust cannot distribute losses to beneficiaries, instead these are carried forward and offset against future profits.

What a trustee can do is governed by the Trust Deed – these are the rules of the Trust.

Why would you choose a Trust?

  • Typically used for holding ‘investment’ interests such as shares or property.
  • Suitable where there is no desire to have a fixed interest and instead would like flexibility in ownership and where tax is ultimately paid.
  • Wanting to separate Trust Assets from Personal Assets – e.g for inter-generational wealth transfer and reducing risk of holding assets personally.

What else should you consider?

  • Who will be named beneficiaries (see below)
  • Who or what entity will act as Trustee and Appointor (see below)
  • Ability to physically pay distributions (expected cash flow) – this is a key reason why we typically don’t recommend using a Trust for a trading business.
  • Whether the beneficiaries of the Trust may need to be limited to a family group through a Family Trust Election.
    • Usually applies if the Trust is receiving franked dividends and/or using carried forward losses.
  • Not suitable for unrelated parties wishing to operate a business together.
  • Ensuring any activities and asset purchases are correctly identified as held for the benefit of the Trust.
Role Responsibilities Considerations
Trustee • Person or entity responsible for the running of the trust.
• Person or entity that is responsible for deciding how any profits or capital will be distributed.
• Can be an individual or multiple individuals or a corporate entity.
• If the trustee changes you may need to update records with third parties (e.g share registries, banks etc).  
Appointer • Role is to appoint or remove the trustee(s). • Can be an individual or multiple individuals.
Settlor • Provides the initial trust property (settlement sum). • Can not be or become a beneficiary of the trust. Usually this is someone outside the family group.
Primary Beneficiaries • Named Beneficiaries from which all other beneficiaries stem.
• e.g. possible beneficiaries include the parents, grandparents, spouse, children, grandchildren, aunts, uncles of the named beneficiary + related entities.
• Changing named beneficiaries can cause a trust resettlement and have significant tax consequences.

What does a Trust structure look like?Trust Business Structure

What other business structures are there?


Our Services

To learn more about Lemonade Beach Accounting, Tax & Business Advisory Services, please follow the links below.



Recent Posts

Why Your Small Business Should Use Swell: A Cashflow Forecasting Tool

In the world of small business, keeping up with the latest data trends and maintaining a healthy cash flow can be quite demanding. This is where Lemonade Beach’s Cashflow Forecasting program, “Swell” steps in – a real time financial tracking and management tool that serves as your financial consultant and advisor.

Three Swell Levels to Transform Your Business: Snapper, Bells, and Mavericks

In this blog post, we delve into the three levels of our Swell Cashflow Forecasting tool: Snapper, Bells, and Mavericks. Each one is designed to address the specific needs of businesses at different phases of their journey.

Your Guide to Tax Planning

Tax planning plays a vital role in both personal and business finance, yet it is often neglected until tax season approaches. However, understanding and implementing effective tax planning strategies can make a significant difference in your financial well-being. In this guide, we’ll explore what tax planning entails, why it’s essential, and when you can leverage it to your advantage.

Balancing Cashflow and Profitability for Business Success

Distinguishing between cashflow and profit is crucial for managing a successful business. Both serve distinct financial purposes and understanding their differences is essential. Profit, also known as net income, is the outcome of subtracting expenses from revenue, while cashflow reflects the movement of cash in and out of a business. Positive cashflow indicates more money coming in, whereas negative cashflow indicates more money going out.