Placing your business in a trust – Is it right for you?

Placing your business in a trust – Is it right for you?

If you own a business, it’s always a good idea to have a solid succession plan in place.

This protects your interests in the business alongside those of your family, clients, partners and supply chain.

There are a number of plans you might consider, but one that is often overlooked is the option to put your business in a trust.

This is a way of protecting business assets when you (the settlor) want to pass your business on to a particular person (the beneficiary).

What is a trust?

A trust is a legal arrangement (rather than an entity such as an incorporated business) wherein part or all of your business is legally owned and managed by a trustee on behalf of a beneficiary.

The trustee has the right of access to all assets within the trust and may use, sell, access or otherwise administer them – provided they act within the best interests of the business and the beneficiaries, and do not use the assets for intended personal gain.

In some cases, you might be both the settlor and the trustee, and may take on a beneficiary role as well.

Trusts can be used to protect business assets, support ongoing business management and reduce tax when you decide to pass your business on – which is why they are used by many types of businesses.

For instance, a family-owned business might use a trust to equitably divide interests among family members while keeping the business operational under experienced management.

Setting up a trust

You should take your time when putting your business into a trust as it can take time and become complex.

For business owners, the types of trusts typically considered are:

There are other types of trusts such as discretionary trusts which allow the trustee to decide how and when to distribute assets to beneficiaries, but these two are the most commonly used for business management and transfers.

The process of transferring your business into a trust may involve:

A trust can significantly streamline the process of passing your business on to the next generation.

The trustees you appoint will manage the business according to the terms of the trust, which can include instructions for eventual transfer of control to your chosen successors – minimising potential conflicts or disruption.

Is it right for me?

There are a number of advantages and drawbacks to putting a business into a trust which you’ll need to consider when making a decision.

The advantages of placing your business in a trust largely concern tax and succession planning, including:

However, you should remember that there are complex rules governing the formation and management of trusts, so you should always seek advice when deciding whether to use them as a succession planning tool.

For advice and support with setting up a business trust, please contact our team today.

LinkedIn
Share
FbMessenger
URL has been copied successfully!

Contact us

Complete the below form and a member of our team will get back to you

If you would like to see full details of our data practices please visit our Privacy Policy and if you have any questions please email dataprotection@hethertons.co.uk.