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Financial setup.

Discussion in 'Accounting, Tax & Legal' started by Compleks, 27th May, 2007.

  1. Compleks

    Compleks Well-Known Member

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    Yes, it's me again, making yet another thread.

    This time I'm curious as to how I should establish myself financially.

    I work as a personal trainer / martial arts instructor. So there is a higher than usual possibility that I may at some stage get into some legal conflicts. I hope this never happens ofcourse, but I would like to be protected never the less.

    I would also like to own my own business one day, which may or may not be relevant.

    I was wondering if there was a way I could protect myself and my assets should I ever run into legal trouble.

    Should I register a company do all my investing/business under? (I would like to own some investment properties at some time, and heard that how you structure yourself is quite important)
    Can a company be used to buy property, shares, stocks, managed funds etc...?
    Will this provide any extra security?

    I would like to structure myself correctly from the beginning so I can avoid any trouble down the track.


    Thanks once again.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Investing via a company is generally a bad idea - you lose a lot of investing benefits if you do.

    A Discretionary Trust is the one of the best vehicles for asset protection, and it gives you flexibility with streaming income and capital gains to any of your defined beneficiaries - making tax planning a bit easier.

    There are other options - but some form of trust is probably what you need ... so some searching ... there have been plenty of posts about them.
     
  3. Compleks

    Compleks Well-Known Member

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    Thanks Sim.

    The more I read into all this, the more confused I become.
     
  4. MattR

    MattR Well-Known Member

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    Compleks

    Companies are generally not good for holding assets - whilst the corporate veil provides limited liability it is generally not so good for tax planning - for instance the 50% general discount for capital gains tax is not available for companies - but it is for trusts.

    For trusts, be wary of discretionary trusts in Vic and NSW for holding property - they now pay land tax from the first dollar.

    As for trading a business, I do favour trusts, however it really depends on what you are doing - there is not one shoe fits all approach.

    If you were wanting to operate a business and invest I would recommend at least two seperate entities to do and hold these interests.

    The other important aspect when setting up structures is that whilst you look for some flexibilty in the structure, you need to keep assessing the structure for its relevance. This means an annual review.
     
  5. Compleks

    Compleks Well-Known Member

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    Thanks again MattR, I appreciate the help.

    Who would I need to talk to in order to set this up?

    I already have an ABN, can I still set up a structure around this? Also, what would be the benefit of operating my 'business' as a separate entity?

    What benefits does investing have when setup as a separate entity? I know it will vary depending on the structure, but what is the general concept behind operating this way? Is it mainly just asset protection?

    How exactly am I protected this way?


    Is this something I should consider before I start investing, or can I fix it up later down the track... Or will that be a big hassle?


    Sorry for all the questions.
     
  6. MattR

    MattR Well-Known Member

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    Answer below

     
  7. Compleks

    Compleks Well-Known Member

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    Many thanks.

    Do you think at this stage it would be wise to find/meet with an accountant. Even though I might only need his services at the end of the next financial year, I don't want any surprises come tax time.
    I just need some guidance so that I don't miss out on any deductions, or do anything stupid.

    What do you guys think of accounting software? I have trials of a few programs (turbocash, MYOB, e-record), none of which I can understand how to use. Would these really be much use to me?

    Cheers! :)
     
  8. MattR

    MattR Well-Known Member

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    From another of your threads you said that you have about $10K in savings at this point - that's to be commended for your age when you probably have been concentrating on studies etc.

    The cost of setting up a Trust for this may vary from about $500 to $2500 so it would eat up a fair chunk. I think that you should probably look at minising your risks in other ways - eg insurance for your training. At this stage, whilst your asset is potentially at risk, it would cost almost as much in legals to get at you as could be got - there would not be a lot of benefit in suing you other than to bankrupt you.

    IMO, invest your money (where, i wouldn't dream to advise), build it up a bit then protect it when its a bit bigger. You need to be aware of the costs invloved at that stage.

    In the meantime protect yourself in other ways, eg. get your own insurance, keep up with any training that your professional body require, train clients on premises that are insured under their own policies etc.

    There may be others on here with different opinions, but I think for someone starting out structures such as trusts for holding investments are a bit of overkill.

    Edit: Although it "may" be worth setting up a trust to trade your business - but I recommend seeing an accountant, as you'll need to discuss potential wages, workers comp, and super issues.