5 minutes read
Registering a Company and Trust
We set up a number of Companies and Trusts for our clients – here are some of the most asked questions (and things that we like to explain to ensure a smooth process).
Each question is answered as concisely as possible. This means that many questions will refer to a definition in another question.
Trust
What is a trust?
A trust is an arrangement where one person holds asset on behalf of another person/persons.
A trust is NOT a legal person (an individual and a company ARE legal persons). The trustee of the trust is the legal person.
Why use a trust?
Trusts, in the right circumstances, can have asset protection, tax and estate planning benefits.
Why not use a trust?
While Trusts can offer great benefits, they require yearly compliance costs and can result in additional state taxes payable (such as land tax and stamp duty). If the Trust Deed is lost or somebody dies, there can be serious problems with the running of the trust.
Trustee
What is a trustee?
The trustee is responsible for signing documents on behalf of the trust and is the one that holds the assets for the benefit of the beneficiaries. A trustee can be an individual or a company, but is usually recommended strongly to be a company.
Trustee Companies
What is a trustee company?
A “trustee company” is a company setup for the purpose of being the Trustee of a Trust.
Can my existing company act as trustee for a Trust?
It is strongly recommended that a Trustee Company only act as Trustee for a Trust (not be a trading company).
It is recommended that a trustee company only act as trustee for one trust, however some people use one trustee company for more than one trust.
Does my company name have to be unique?
Yes. Companies have an ACN (Australian Company Number) so names must be unique and not too similar to another name. You might choose to provide us with 3 names if you suspect the first priority isn’t going to be available.
Feel free to provide us(and contact us to discuss if the name you want appears invalid).
Companies also have some word restrictions like Royal, Chartered, Veterans, Hospital, Bank, etc. unless you ARE one of those).
What should I call my Trustee Company?
It doesn’t really matter to be honest. In the past they used to just be made up words like Feltone or Condax.
But since you can choose, might as well choose something that means something to you.
Whether this is linked to your family, an attribute/value/animal/place/food/nickname/positive affirmation – (or anything else!).
Initials e.g. JSTM Pty Ltd (John, Sarah, Tim and Matthew) are often already taken.
Something short is harder to find a company name, but is better for spelling.
Something professional and positive/neutral is best for business.
We are happy to brainstorm names with you.
Does my Trustee company have to match my Trust? (e.g. JS Pty Ltd for JS Trust)
No. It can be completely different to the trust, however if called the same makes things simpler.
Is it important to get the setup details correct?
Yes. It is enormously difficult to amend company data after the initial forms are lodged.
This may occur at the Place of Birth (hospital where the director was born) but we’ve even had incorrect birthdays suplied to us.
We charge $385 where we have lodged incorrect information – so it is imperative that you provide us with complete and correct information. Please ask any other parties such as partners to review their details before providing to us.
Trust Roles
Appointor – The Controller
This is the person who controls the trust because they can fire and hire the Trustee.
While the appointor may also receive funds as a beneficiary, this is not essential.
Settlor – The Starter
A Settlor is the “starting gun” to start the Trust. They signing the trust deed and gift $10 to start the trust (to be deposited into the Trust’s bank account). After that they have no further involvement with the trust. You cannot pay them back the $10 – it must be a gift to the trust.
What are the limitations of a Settlor/Who should be Settlor?
A Settlor can never receive a distribution from the trust.
We recommend a friend, neighbour or work colleauge to act as settlor.
I personally get rid of “The” where possible (i.e. Integrity Trust as opposed to The Integrity Trust).
If you want our opinion on your name choices, please ask.
Does my trust name have to be unique?
General Asset Protection
Please note we cannot provide legal advice. The below information is basic and does not take into account your personal circumstances and can not be relied upon.
What is the Asset vs. Risk Model?
The basic model is to separate Assets and Risk (i.e. Business).
This can be done at an Organisational Level – for Example Company 1 Runs The Business and
Company 2 is The Service Entity that hires the staff and equipment and signs the lease.
Separate Trusts might hold the properties.
This means that if an employee or creditor sues then they sue the Service Entity rather than the entity that Runs the Business or Holds the physical property or Intellectual Property Assets.
It can also be done at a personal level.
How does the “Asset Person”/”Risk Person” work for couples?
The asset person is typically the person least likely to be sued and controls the trusts (as appointor).
The risk person is typically the person more likely to be sued and is director for the business and may also be the director for the trustee company.* (please note that a review of your current and planned future position is key to decide who is in these roles).
I am single – how do I apply the “Asset/Risk Person” model?
If you are currently single or not in a committed relationship, you may not be able to apply the model.
Should a sibling or parent be the “Asset Person”?
It is possible that a parent or sibling might be used, however please consider this carefully and discuss with us as family and financial situations can change over the years (and there have been many lawsuits where families no longer get along).
What if my partner and I split up?
The family law court has extensive powers to “look through the corporate veil”. So asset structures that should help protect you from creditors and litigation, DON”T protect you from a divorce. For this reason (and this is not legal advice), typically clients setup structures on the basis that their relationship will continue.
If you have any concerns in this area, please chat to us, (and/or chat to a solicitor for legal advice).
About Scott Kay
Integrity Plus Accounting
Scott Kay is currently a husband and father of one young daughter. He founded Integrity Plus Accounting over 4 years ago and has had his own clients for over 10 years. He has worked for 3 other accounting businesses and loves to help clients grow – in their business, their wealth, their mindset and their lives.
