Discretionary trust or family partnership with my fiance

Hi,
Trying to decide on a business structure for our import/e-commerce business idea, selling clothing...

With my fiance we were looking into establishing a family partnership before we get married in August 2012. We have no children and are in our early 30s...Have been reading but got confused with the differences between family partnership and discretionary trusts. Appreciate your views to a few questions...In our case, we have no problems in terms of trusting each other, we will manage things together, we are basically after tax benefits, we will keep our days jobs as well, we dont have assets and not much capital to invest.

1-) Can you establish a family partnership or discretionary trust, or either, before getting married? She will take my surname when we get married, so not sure of the implications...

2-) Cant you put all the profits in low-income earners tax return with a family partnership? She is a low income earner and as you know, first $16k is free, so it will make more sense to report the profits on her tax return. Do you have to have a discretionary trust for this? Can't you flexibly manage the income allocation with a family partnership as well?

3-) Are there any other benefits to establishing a discretionary trust. Legal liability or being sued are most likely not gonna be a problem in our case.

4-) Would a discretionary trust be better suited for an importing/e-commerce business, and why?

5-) How do discretionary trusts compare to family partnerships? What are key advantages of a discretionary trust that a family partnership does not have...Why not all family partnerships establish as discretionary trusts - lack of knowledge?

6-) I have seen Discretionary Family Trusts, Discretionary Investment Trusts and Discretionary Trading Trusts...This is where I am lost...

Will be grateful for your advice...

PS: I read through that thread called 'Partnership or discretionary trust?' but the circumstances he is inquiring are very very different from mine. Appreciate your responses in my case.

 

Hi

1. Yes. marriage is not relevant.

2. No I don't think so. A partnership is not flexible. each party has a fixed interest. A discretionary trust would be better in this regard.

3. Yes. Neither a trust or partnership is a separate legal entity but are treated separately for tax purposes. With a partnership all partners are the legal 'owners' and all names go on contracts and all will be jointly liable for partnership debts. This is why you should never use a partnership of individuals.

With a trust it is the trustee that is the legal 'owner'. The trust's name goes on legal documents and it the one that is sued if things go wrong. Having 1 trustee can therefore protect the other person. Having a company as trustee is even better because the company can have no assets and provide excellent asset protection.

There are also estate planning aspects. A partnership generally dies with the partner but a trust lives on. Trust assets don't form part of your will. May not be too relevant with a business like this though.

4. DT with company as trustee. Because of the flexibility with minimising tax each year and the asset protection aspects.

5. see above. I cannot understand why anyone would establish a partnership.

6. Different names maybe. However, DTs are governed by the trust deed so each trust is different. You may want it set up in a particular way for example.