Hi guys,
I am in a situation where I have a compay C1 and a trust T1
where C1 is a trustee for T1
C1 is a shelf company and holds no assets
has shareholdersT1 has a business that is trading and has beneficieries.
I am now looking to start investing in property and want to protect the property.
I have been adviced in 2 ways:
1: Set up a new company and a new trust
-that way the business is completely seperate from the property
2: Just set up a new trust, T2, with C1 ATF T2
Avoid setting up a new company and expensive fees
but still get asset protection as the business is in a seperate trust to the property.My main objective is asset protectin. Can someone please point me in the rigth direction
as 2 accountants have charged me professional fees and adviced me differently.Thank you
hi
I think you need to stand back and assess the risks.
There are basically 2 risks. 1 you are sued, and 2. the trust is sued.
If the trust is sued, it is actually the trustee that is sued. it would be the trustee that goes to court. Usually the trustee is indemnified out of the assets of the trust, but if these are not enough then they can be liable for the rest of the funds.
Running a business is risky. There is a chance that the business will be sued. So the trustee could be at risk. Having a company as trustee is good as it protects the individual. If the company has assets then these could be at risk – but your's doesn't which is good. Having a company as trustee is also good as it clearly separates your assets from the trust assets.
Now, if the company is a trustee of another trust as well. If the trustee company were to go down the other trust assets should, generally, be safe. The assets legally owned by the trustee company are not really the assets of the company, but are the assets of the trust.
Disputes can arise where it is not clearly established which trusts owns which assets. As you know it is the trustee's name that is on title. the trust isn't mentioned anywhere. So it can be difficult to prove which trust owns which asset. Having separate trsutee companies would make this clear.
You should also consider the risks of loans. Some business transactions require giving a charge over the company. This could affect future borrowings if the same company is used for the real estate trust.
Setting up a company now costs about $400 and about $212 per year in ASIC fees. A nil tax return would also be required. So it is not that much in the scheme of things.
If you are personally sued, then having different trustee companies shouldn't really make any difference as the assets of the company are not your personal assets.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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