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Trust

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Trust

Unlike a company, a trust is not a separate legal entity. Trusts are often used in connection with running a business for the benefit of others. A trust is a structure where a trustee (an individual or company) carries out the business on behalf of the members (or beneficiaries) of the trust. Family businesses are often set up as a trust so that each family member can be made a beneficiary without having any involvement in how the business is run.

Advantages

  • Reduced¬†liability - especially if corporate trustee.
  • Asset protection.
  • Flexibility of asset and income distribution.

Disadvantages

  • Can be expensive and complex to establish and administer.
  • Difficult to dissolve, dismantle, or make changes once established particularly where children are involved.
  • Any profits retained to reinvest into the business, will incur penalty tax rates.
  • Cannot distribute losses, only profits.
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