Week One - Types of Business Entities (Trusts) Flashcards
When does a trust exist?
When the trustee is required to hold or invest property on behalf of the beneficiary
Is a trust a separate legal entity?
No, it is not
How is a trust settled?
By a deed of settlement
What is the degree of liability for the trustee?
The trustee is personally liable for debts and liabilities
Are there any limits on beneficiaries?
There are no limits on the number of beneficiaries
What are TWO common examples of trusts?
Superannuation Trust
Testimony Trust
True or False: A disadvantage of a trust is that it is an expensive and complicated structure for distributing profits?
True
True or False: A disadvantage of a trust is that it is difficult to obtain loans from structure?
True
Advantage or Disadvantage: The Trust Deed has to state the powers of the trustee and this can prove difficult in regulating the trustee?
Disadvantage
Advantage or Disadvantage: The trust distributed profits but not losses?
Disadvantage
True or False: A trust cannot trigger capital gains trust?
True
What are the three main roles or trusts positions?
- Individual/Corporate Trustee
- Trading Trust (Trading As Business Name)
- Beneficiaries
What is the roles of individual/corporate trustee?
Makes the decisions regarding the trust
What are the roles of trading trust trading as business name?
- Owns and reports business operations
- Distributes profits to beneficiaries
- Used to trade for benefit of beneficiaries
What are the roles of beneficiaries?
- Record trust distribution as taxable income
2. Do not own assets (scope for protection)