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Types of Business Structures - Trusts

Posted on Feb 16, 2012 | Tags: legal, commercial law, business structures | Comments (0)

Usually, an owner of property holds both the legal interest and the beneficial (or equitable) interests in the property. In contrast, trusts are complex legal creatures which have the fundamental characteristic of creating a separation of the ownership of the legal and the beneficial (or equitable) interests in the property. The entity that owns the legal interest is referred to as the trustee whilst the entity that owns the equitable interest is referred to as the beneficiary. There may be multiple trustees and/or beneficiaries and each may be a natural person or an artificial person (for example, a company).

Within the intricate web of law governing trusts, there are a number of varying types of trusts that can be instituted or are implied, including unit trusts, trading trusts, constructive trusts, implied trusts, express trusts and resulting trusts. One of the most common forms of trusts is the discretionary trust. The capacity to protect assets, effectively manage tax (by taking advantage of concessional tax treatment and income splitting) and provide for flexible distributions of profits are the factors driving the attraction and interest in discretionary trusts in Australian businesses (and it is notable that discretionary trusts are implemented more commonly amongst the high wealth bracket). One of the most advantageous features of the discretionary trust is that there is no specific apportionment or entitlement to income, profits, shares or interests to the trust assets. Unlike fixed trusts (where the beneficiaries are entitled to a designated portion of the trust profits), a discretionary trust gives the trustee “discretion” in the distribution of profits and assets to the beneficiaries. Accordingly, the assets of the trust are protected because the beneficiaries have no specific legal entitlement to them.

However, there is a downside; the law governing trusts is complicated and multifaceted, shrouded by layers of common law and various statutory instruments. To properly take advantage of a trust, it is necessary to obtain sound legal and tax advice. Our Trust Lawyers are highly experienced in establishing and maintaining trust structures.

Contact our office to speak to a Business Lawyer or Commercial Solicitor. We have branch offices conveniently positioned across the Sydney metropolitan area, including in Liverpool, Gordon and Baulkham Hills. For a full list of our office locations, with complete addresses, click on our Locations tab above or contact our main office line on (02) 9233 4048.

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Types of Business Structures - Trusts

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