[ESTABLISHING A BUSINESS ENTITY IN AUSTRALIA]
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Each party is treated individually or separately for tax purposes. This enables each party to use its own preferred tax structure. The main disadvantage of a joint venture is there is often joint liability to third parties.
general beneficiaries (which may include the family members of a named beneficiary). One of the benefits of a discretionary trust is the trustee has the ability to make distributions which take into account the beneficiaries’ individual tax circumstances. Discretionary trusts are most often used for family-owned businesses. Generally, discretionary trusts are not an appropriate investment vehicle. (b) Unit trusts Under a unit trust, the beneficiaries (referred to as unitholders) subscribe for units in the trust. Each unitholder has an interest in the capital and income of the trust that is relative to the number of units that they hold. Unit trusts have the benefit of conferring a clearly defined entitlement and are often considered more appropriate than a discretionary trust for non-family business ventures. Sole Trader This is the simplest form of business structure. A sole trader is an individual person who carries on business as an individual under their own name or under a registered business name. A sole trader is personally liable for all debts of the business. Managed Investment Schemes A managed investment scheme ( MIS ) enables a group of investors to contribute capital in consideration of acquiring a right in the benefits of the scheme. The contributions are pooled for investment (typically in a trust-based arrangement) or used in a common enterprise, in order to produce that benefit. Investors do not have day-to- day management of the MIS’ operations. Instead, a MIS is managed by a ‘responsible entity’ with an Australian Financial Services Licence ( AFSL ), acting in accordance
(b) Incorporated joint venture
In an incorporated joint venture, the joint venture is conducted by a company. The company is often established for the specific joint venture, and each party is a shareholder. The shareholders usually enter into a shareholders agreement, which sets out the rights and responsibilities of the shareholders. The parties must also comply with the Corporations Act. Trust An Australian business may be carried on by way of a trust. Under a trust structure, the trustee (who may be an individual or more commonly a company) conducts the business and holds all income and capital on trust for the beneficiaries. The beneficiaries can be individuals, trusts or companies. The trust is created by a document called a trust deed. The trust is governed by the terms of the trust deed, Australian state or territory legislation and the common law. Trusts fall into two categories: discretionary trusts and unit trusts. (a) Discretionary trusts Under a discretionary trust, the trustee has discretion to distribute the income and capital of the trust to any of the beneficiaries. It is common for discretionary trusts to have specified (or named) beneficiaries, as well as classes of
ILN Corporate Group – Establishing a Business Entity Series
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