When starting in business or as your business grows it is essential to consider you business structure. This may involve the use of Companies and Trusts.
Debt and Equity considerations.
By providing some working capital through loans owners can provide a route to withdraw funds from the business as it grows. Owners can also consider making loans through a discretionary Trust, which is controlled by the owners. Interest on the loans can then be allocated amongst trust beneficiaries to minimise tax on the income.
Owners should ensure that their loans are appropriately secured and registered on the Personal property Securities Register (PPSR). This will give preference over unsecured creditors should the business fail.
Separate business assets from investments.
It is prudent to ensure that as many investment assets are owned outside the business, either in a family company or trust. Land and buildings should be owned by an investment entity with a market value lease back to the business.
If the business has intangible assets such as brands, patents and trademarks these can be protected if they are owned by a separate entity, from the operating company.