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Multiple Businesses under one ACN - Need advise

Discussion in 'Business & Startup Investing' started by Deep1, 24th Sep, 2016.

  1. Deep1

    Deep1 New Member

    Joined:
    24th Sep, 2016
    Posts:
    2
    Location:
    SA
    Hi everyone,

    I am planning to start business and plan is to gradually expand into 3 different businesses:
    1. Consulting
    2. IT
    3. Cafe

    Questions:

    1.Can I have all 3 under one company name i.e. ACN?
    2. In case, I may need to include someone for IT business or one of the 3 businesses of the
    company, is it possible under same structure of 1 company?

    Please advise.

    Regards,
    Deep
     
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  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,774
    Location:
    Sydney, Australia
    This would be a great question to ask over at BusinessChat :: Australian Business and Startup Forums :D

    You can do whatever you like under the one company name / ACN - there are lots of "diversified businesses" out there.

    You can even have multiple business names (trading names) registered to the same company structure (so "Deep1 Pty Ltd trading as Deep1 Consulting", "Deep1 Pty Ltd trading as Deep1 IT Services" and "Deep1 Pty Ltd trading as Deep1 Cafe"). They would all be on the same tax return, so are basically the same business with three separate "fronts".

    The question is - would you want to?

    If your consulting work gets the business into legal trouble, do you want your IT work or your cafe affected by it?

    If a customer at your cafe slips and injures themselves and your insurance won't cover it completely for some reason - do you want that to affect your IT or consulting businesses you've worked so hard to build up?

    If you one of your businesses ends up being hugely successful or you get an offer you can't refuse to sell it, or you find someone you really want to go into business with for that part of the business - it would make it far easier if that were operated as a separate business.

    Similarly, if your cafe ends up struggling and you want to sell the business as a going concern, that's much more problematic if it's a part of your IT / consulting business.

    I'd seriously look at the option of keeping them separate - yes, it will increase your costs and your admin work a bit, and there are other implications you'll need good advice on, but it will potentially save you a lot of heartache down the track if they genuinely are separate businesses.

    FWIW, I currently operate 4 separate businesses, will probably start my 5th next year.

    My structure is I have a consulting company which employs me and provides services to my other companies. My consulting company invoices my other companies so profit from all the other companies flows to my consulting company, which then pays my salary and covers most of the shared costs across the various companies.

    This isn't necessarily the best approach for you and it does cost more than doing it all under one business - but it's something to consider because it gives me flexibility as I grow and each business is isolated from the others.
     
  3. AnthonyKing

    AnthonyKing Active Member

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    30th Oct, 2010
    Posts:
    25
    Location:
    Sydney NSW
     
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  4. AnthonyKing

    AnthonyKing Active Member

    Joined:
    30th Oct, 2010
    Posts:
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    Location:
    Sydney NSW
    Hey Deep and All
    Yes Its a good question and deserves a good answer.

    My view would be to use a single corporate trustee for a Unit Trust with a SMSF as a beneficiary in a carefully structured manner: or for a Discretionary "Multi Trust" which could hold the 3 business names in separate sub-trusts to keep the business interests segregated.
    You could register a Group ABN for the different business names held by the DT.
    What do you all think?
    AK
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Location:
    Sydney, Australia
    How does that work? I've not heard of anyone using an SMSF as a beneficiary before - I would have though that super contributions would need to be associated with an individual and so you couldn't distribute from a trust directly to an SMSF?

    I also don't really understand the benefits of using a trust (discretionary or otherwise) to hold a business like this compared to a simple Pty Ltd company?
     
  6. AnthonyKing

    AnthonyKing Active Member

    Joined:
    30th Oct, 2010
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    Location:
    Sydney NSW
     
  7. AnthonyKing

    AnthonyKing Active Member

    Joined:
    30th Oct, 2010
    Posts:
    25
    Location:
    Sydney NSW
    Dear Simon and All
    Its been around since 1985, read the case Forli Pty. Ltd V ATO in April 1991 - the ATO lost and these trusts were the most favoured structures for years until the law was changed in 1999. Lookup pre 1999 smsf/trust. What were the benefits? this was pre October 2007 when SISA s674A was included and allowed a SMSF to borrow. So back in 1985 the above structure was devised by Gold Coast Accountants Haines Norton established the SMSF Fixed Unit Trust structure for a client - the Trevisan family so the trust could borrow and build a factory which was leased to a related party. The benefits were that the business profits flowed into the SMSF taxed at 15% and was then re-invested in more units in the trust. Post September 1985 when CGT became law any Capital gains were taxed at 10% in the SMSF. The ATO estimated that in 1998 there were about 40,000 of these business structures. I set up lots between 1992 and 2000 and still have many happy clients in retirement with substantial business tax free cash flows. Even second hand pre 1999 smsf/trusts are valuable for another two generations to inherit. If you want some interesting light reading try this link.
    Regards to All
    ISBN: 0642 407215 - Google Search