Trust – advantages and disadvantages
A Trust is formed when a trustee holds the assets and runs the business, distributes incomes to beneficiaries, and follows the provisions in the trust deed. Consider a Trust if more than one family is involved in running the business.
Advantages of a Trust include that:
- limited liability is possible if a corporate trustee is appointed
- the structure provides more privacy than a company
- there can be flexibility in distributions among beneficiaries
- trust income is generally taxed as income of an individual.
Disadvantages of a Trust include that:
- the structure is complex
- the Trust can be expensive to establish and maintain
- problems can be encountered when borrowing due to additional complexities of loan structures
- the powers of trustees are restricted by the trust deed.