We have a range of entities used in our family business, some that we have inherited and some that are new. Quite often I wonder if there is any real benefit to this, or if we can wind some of them up to simplify our affairs?
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It’s a common occurrence to see family farming businesses with different entities that have been handed over or inherited and are continued on through subsequent generations without any change.
Understanding why we should or should not keep these entities is a fair question to ask.
The reasons for maintaining these separate entities can vary from asset protection and managing tax liabilities, through to specific family dynamics.
Quite often however, it can be an underlying tax cost upon moving assets.
Or it can be simply due to people not considering the question: do the entities still serve a commercial purpose as part of our family business operations?
If the entities in place for your family group are an effective structure, and you understand why each entity exists – that’s great.
If there are any entities that no longer serve a commercial purpose, they are the ones you should strongly consider winding up.
Winding up an entity shouldn’t be completed without a clear understanding on why, how and the costs to do so, which will be influenced by the type of entity and the net assets that are controlled by it.
Partnerships, trusts and companies are governed by various elements of legislation, all of which need to be considered should you wish to wind these entities up.
While every family has a different set of circumstances to consider, to make an informed decision on the question, you need to have a holistic view on why the entities exists, which can only be driven by effective communication between families and the advisers who support them.
Don’t underestimate the advice and administration needed to execute the wind up of an entity.
The cost of not getting it right will most likely be far greater than undertaking the transaction itself.
If you would like more information on this topic, or have a question you need assistance with, please email me at albury@crowehorwath.com.au
Any information in this article has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material. While reasonable care is taken in the preparation of this information to the extent allowed by legislation, Crowe Horwath (Aust) Pty Ltd ABN 84 006 466 351, accepts no liability whatsoever for reliance on it.
