Legal Tip 347: 6 Different Uses of Companies

Companies can be used for many different things, including the following:

a) Operate a business

b) Hold business assets

c) Operate as a trustee

d) Operate as a bucket company

e) Operate as an investment vehicle

f) As a contracting entity

Plus, there are more uses that I haven’t thought of yet.

Operating a business is generally the most common use. A company is a separate legal person so can provide asset protection, but also allow profits to be split and paid out to shareholders.

Holding business assets – a trading company is at risk of litigation so they would generally not hold any assets. Another company could hold the valuation assets and license the use to the trading company.

As Trustee: A company is the preferred legal entity to act as trustee of a trust. The company can be trustee instead of an individual and this allows for greater asset protection and a clear distinction between personal and trust assets.

Bucket Company: A company can retain income and pay tax at a flat rate – 30% for passive income or 26.5% for trading companies. So, causing a trust to distribute to a company can save tax and allow for more capital to invest.

Investment Structure: Companies themselves can invest. They are generally not considered as investment structures, but this is often misguided. They can be great investment vehicles because of their ability to retain income and the low tax rate.

Companies can be used to contract, in certain situations, to reduce risk. A company could lease a property and then sublease it to a trading entity or enter into a contract to purchase a property with an individual settle on the property – many legal issues to consider so seek advice.


What else can a company be used for?