Reading time: 3 minutes

A trust can be used to run a business. But because it is not a legal entity, the trustee undertakes the business activities on behalf of the trust. A trustee can be an individual or a company — we recommend a corporate trustee. You should review the trust deed to ensure the trustee has the power to enter into business transactions.

How the trustee distributes the income the business generates will depend on whether its a discretionary trust or unit trust.

Type of Trust Distribution
Discretionary Trust Beneficiaries of the trust will distribute income at the trustee’s discretion
Unit Trust Income will be distributed among unitholders per their unitholdings. The trustee has no discretion to change this.

 

It’s likely that you will operate your business through a unit trust as business partners will want to make sure they receive their fair share of the business’ profits. If you are running a business through a trust, you will need to apply for an ABN and a TFN for the trust. You should also consider whether you are required to register for GST and PAYG.

What Documents Do I Need?

When operating a business through a trust, you need the appropriate documents in place. A trust is a complex structure and complications could arise if you don’t set up the trust properly. This includes a trust deed that allows the trustee to conduct the business. Make sure that the trust deed doesn’t prevent the trustee from undertaking the relevant business activities.

Shareholders Agreement

If you have a discretionary trust with a corporate trustee, and the corporate trustee has many shareholders, it’s sensible to have a shareholders agreement in place. A shareholders agreement will set out the decision making process.

It’s important to know who controls the trustee as the trustee is the entity that enters into transactions and distributes income to the beneficiaries of the trust.

Where you have a unit trust with a corporate trustee, you should consider having a combined unitholders and shareholders agreement.

This agreement sets out the rights and obligations of the shareholders in the corporate trustee and the unitholders in the unit trust. It also covers how to issue and transfer more shares/units.

In addition to the documents relating to the trust, you will need documents connected to operating your business. The types of documents you will need depends on:

  • the type of product or service you are providing;
  • the industry you are in; and
  • your customers, suppliers, employees and contractors.

What About Set-Up and Ongoing Costs?

If you’re setting up a company to act as a corporate trustee, there are ASIC fees that you will need to pay along with annual review fees. You will also need to factor in the costs to draft the trust documents (for example, the trust deed and shareholders agreement) as well as to prepare the accounts.

Key Takeaways

When used correctly, a trust can be an effective way to operate your business. Consider what agreements you need in place as well as whether you should register the trust for an ABN, TFN, GST or PAYG. If you have any questions about running your business through a trust, get in touch with our specialist business structuring lawyers on 1300 544 755.

Webinars

Everything You Need to Know about SaaS Agreements

Thursday 7 April | 11:00 - 11:45am

Online
Understand which contracts will protect your SaaS contract from risk, and how. Register for free today.
Register Now

What to Consider When Buying a Tech or Online Business

Wednesday 13 April | 11:00 - 11:45am

Online
Learn how to get the best deal when buying a tech or online business. Register for our free webinar today.
Register Now

Corporate Governance 101: Responsibilities for New Directors

Wednesday 27 April | 11:00 - 11:45am

Online
If you are a new company director, join our free webinar to understand your legal compliance obligations. Register today.
Register Now

Rogue Directors and Business Divorces: How to Remove a Director

Thursday 28 April | 11:00 - 11:45am

Online
Removing a board director is not simple. Join our free webinar to learn how to handle rogue directors. Register today.
Register Now

Employment Essentials for Tech Businesses

Thursday 5 May | 11:00 - 11:45am

Online
Protect your tech business and your employees by understanding your employment legal obligations. Register for our free webinar today.
Register Now

How to Protect and Enforce Your Trade Mark

Wednesday 11 May | 11:00 - 11:45am

Online
Protect your business’ brand from copycats and competitors. Register for this free webinar to learn how.
Register Now

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Online
Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer