Long Term Friendship
Joe is currently single and has a child who lives with the mother. Adam is married with two children.
The proposed business arrangement is to combine forces to earn more income without the need to purchase equipment .
New Entity Options
Both Joe and Adam have their own work vehicles, tools and various building industry contacts.
New entity options are either a partnership, company or trust. To optimise their respective tax positions and limit their exposure to personal liability they chose a trust structure.
Non Related Business Structure
The ideal trust structure for non-related business partners involves three separate entities:
1. The primary entity is a unit trust with units owned equally.
2. Both Joe and Adam have a discretionary trust each holding an equal number of units in the above mentioned unit trust.
This structure allows profits of the business to be distributed to each family by way of distributions to their respective discretionary trusts.
Each family’s personal tax outcomes can then be achieved independently of each other.