There are many reasons to start, grow and maintain your small business, but no matter why you’ve started it, it’s undeniable that you need to profit to survive. That’s why it’s so important that your business be structured in an appropriate manner to maximize the amount of after-tax cash that remains in your hands.
Most successful small businesses are operated through a corporation to take advantage of income tax deferrals and liability protection. The addition of a family trust as a shareholder of a corporation will allow you, as the business owner, to maximize the after-tax cash available to you. Discretionary family trusts are an incredibly useful tool that have become popular when structuring a corporation.
A discretionary family trust is a relationship that exists between the Settlor, the Trustees and Beneficiaries. A trust is settled when a person (the “Settlor”) transfers property to another person (the “Trustee”) to hold for the benefit of one or more persons (the “Beneficiaries”). The trust agreement defines what the Trustees may do with the trust property and outlines the interests of the beneficiaries.
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