Trust Vs Company

yingwei..suoyi

Ok, we know both structure have their advantages and disadvantages, when it comes to costs and asset protection. Though this is not an issue which bothers me right now, I am just curious (and for my own learning), that:

-At what stage will having a trust be better off than having a company?

-What are the likely scenarios that wold favor a trust over a company?

Thank you for the enlightenment.

PS> I suspect that some accountants would advocate for trust set-ups (even when a company would suffice) simply because to their own benefits? (cost of setting up and higher maintenance, that is). Right? Wrong?

shuangchao

Cost of setting up a trust may be slightly higher than Company (about $300 more), but it is an one-off expense. The recurring cost of maintaining a trust is not higher than Company, unless a complex structure of a combination of trust and Company is used. Accountants favors trust mainly because:
- The ability to access CG concessions, while Company is not entitled to any. People generally don't realise this until they sale their assets in the future.
- Offers greater asset protection compared to Company.
It is a poorly understood area by many accountants. but i don't believe most accountants ask their clients to set up trusts because they want to make more money out of their clients.

shuangchao

Just to clarify, by CG concession, i mean the 50% discount.

yingwei..suoyi

原帖由 shuangchao 于 2009-3-26 12:55 发表
Cost of setting up a trust may be slightly higher than Company (about $300 more), but it is an one-off expense. The recurring cost of maintaining a trust is not higher than Company, unless a complex s ...

Hmmmm...in that sense, why don't most companies convert to trusts? It seems there are way more companies than trusts?

Also, i heard there are some crackdowns with misuse of trusts for tax evasion by ATO?

And how big a company would be to start considering trusts?

Thanks for the enlightenment, certainly enriching.

shuangchao

Converting into trusts triggers capital gain unfortunately
Like i said trusts are poorly understood, in fact, Company are often used as a easy way out by some accountants.
Personally, i will always recommend trusts for investment/asset holding entity, Company is fine for a straight foward trading entity.

丹儿

很多人是成立 trust，然后trust来设立不同的company。

Devil_Star

原帖由 丹儿 于 2009-3-26 14:43 发表
很多人是成立 trust，然后trust来设立不同的company。

我想你说的是TRUST的TRUSTEE是COMPANY？

Marsonline

1. What if the trustee is a company? Any CGT concession?

2. Is that Trust is an agreement whereas company is a legal entity?

shuangchao

1. yes
2. no, they are both entities on their own right

宁静而致远

原帖由 shuangchao 于 2009-3-26 12:55 发表
Cost of setting up a trust may be slightly higher than Company (about $300 more), but it is an one-off expense. The recurring cost of maintaining a trust is not higher than Company, unless a complex s ...

May I know how the assets to be protected in terms of Trust?

shuangchao

If assets are owned by the trust, you may for example, set up the trust in a way that the beneficiaries are not specified. so if you get into a legal battle, your assets which sits in the trust will remain untouched.

正常

But is trust still better if there are not many beneficiaries to whom the profit can be distributed to, especially for those who don't have a big family.

eagleowl

find a seat in this classroom

shuangchao

原帖由 正常 于 2009-3-28 16:14 发表
But is trust still better if there are not many beneficiaries to whom the profit can be distributed to, especially for those who don't have a big family.

Whether to choose between trust & company, has to be assessed on a case by case basis. Even when you decide to go with trust, accountant has to make a decision as to what type of trust is most suitable to you. If you are the sole beneficiary of the trust, you may consider using trust as a asset holding entity, while you run your business through another structure. before you go down this path, you may have a medium - large business, or a small but very risky business, or you simply have significant amount of investment that you want to protect them regardless.
I am certainly not saying trust is better than Companies in every aspect. consult with your accountant before choosing the right entity for you.