Business Partners Non Related Parties Case Study

David Maynard

6 years ago

BUSINESS PARTNERS

CASE STUDY

THE PARTNERS ARE NON RELATED PARTIES

Joe and Adam are plumbers who have both worked together on various construction sites….

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Long Term Friendship

Joe and Adam have been building a great long term friendship over the years and decide to start their own plumbing business together.

Business Arrangement

Joe is currently single and has a child who lives with the mother. Adam is married with two children.
The proposed business arrangement is to combine forces to earn more income without the need to purchase equipment .

New Entity Options

Both Joe and Adam have their own work vehicles, tools and various building industry contacts.

New entity options are either a partnership, company or trust. To optimise their respective tax positions and limit their exposure to personal liability they chose a trust structure.

Non Related Business Structure

The ideal trust structure for non-related business partners involves three separate entities:

1. The primary entity is a unit trust with units owned equally.
2. Both Joe and Adam have a discretionary trust each holding an equal number of units in the above mentioned unit trust.

This structure allows profits of the business to be distributed to each family by way of distributions to their respective discretionary trusts.
Each family’s personal tax outcomes can then be achieved independently of each other.

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