Business Structure - Property Development

Hi All,

First post for me here after being a long term reader. I'd like to thank in advance all the active members that spend their time adding value to this great forum.

I'll keep the facts and questions simple.

Facts:

1- Proposed property development business. Build and sell, or buy and renovate then sell. All in VIC. Could be one project at a time, or multiple projects simultaneously. Starting off with one project only.
2- Multiple stakeholders providing capital (up to 10). Mostly Australian resident investors, in addition to foreign tax resident investors
3- Each project will be funded by a different group of investors. Investors may fund and be involved in multiple projects at the same time.
4- Only 3 main investors will be responsible for the project (i.e. Directors), which in addition to them contributing capital, they will charge 2-2.5% management fee.

The aim is to have a continuous structure long term that allows for flexibility and scalability.

The structure we have in mind after some research is the following:

- Unit Trust with a Corporate Trustee. The 3 main investors will be the corporate trustee's directors & shareholders (under their name personally or an entity of their choice)
- All Investors purchase and own units in unit trust
- This Unit Trust then owns and is the sole shareholder in another company, which will be the main operating company. Directors of this new company are also the 3 main investors.
- Pooled money in the Unit Trust be then lent out to the operating company, and any profits paid to the unit trust as dividends, then to unit holders as distributions

Main questions:

1- Is this structure good?
2- If unitholders change halfway during projects, will that affect ownership or have stamp duty consequences on any ongoing projects?
3- For build and sell, is it better to have another 3rd company so one can only own the assets and another for operations. Asset protection and separate assets from operations?

 

simple questions but complex answers.
Seek specific legal and tax advice but also credit advice if the owner will need finance

 

Especially about Driectors. Let alone unitholders and control. If one was a Disc Trust or SMSF it may affect a bit. Credit. GST and more....

 

Do you mean the main 3 investors being directors? The Unit Trust could be a hybrid trust to distribute to different groups of investors separately for each project. No SMSF is involved. No credit or banks are involved.

 

Doesn't this open everyone up to the liabilities of any one project?

 

How will the owner of the property get money to build?

 

funds provided by the investors. No banks or finance are used.

 

funds provided by the investors. No banks or finance are used.

 

Because the corporate trustee is the sole shareholder of the operating company?

 

How will they provide funds?

 

through their savings. None of the investors will be borrowing to invest.

 

You don't just let a company use your money! I am not sure you understand the significance of this.

 

I am not sure if I understand what you are saying. Similar to a lot of unit trusts or companies, you buy units/shares and put money (lend as related party loans) into the company or trust. Do you mean the funds being unsecured loans?

 

Best to get specific advice