Mortgage Broker business structure

I will shortly be setting up a new Mortgage Broker company, with 4 family members.( all new mortgage brokers)

We are considering setting up a discretionary trust. However, interested to see how others have their businesses structured.

Do you have it set up, trading as a corporate trustee ?

Or a Trust as a shareholder in the company?

Interested to hear your thoughts.

 

Speak with an awesome accountant.

Plenty on this forum - Paul Gerrard would be a good start.

Cheers

Jamie

 

The ideal structure would depend on what the longer term aspiration of the business are.

If you're wanting to build a business which the family owns, I'd trade through a Pty Ltd company, with the shares owned via a discressionary trust or a unit trust (if you want each family member to have an allocated share).

If you're wanting to become an aggregator of some description (bring lots of other brokers in on it), set up as a discressonary trust (with corporate trustee and family as directors) which will have the agreements with your existing aggregator and is the one that gets paid. Then each individual broker (both now and in the future) can contract directly to the trust either via their own company or just on their own.

The first structure is commonly used and works well for most broking businesses. The second structure holds significant flexibility for substantial growth in a different direction (aggregation). Most brokers generally don't want this nor would they ever achieve it. It's also significantly more complicated to administer. It's more like a group of individuals working under the same roof.

 

You wouldn't want a discreetionary trust running the business if there are 4 separate parties involved.

Consider either
1. Company with shares owned by 4 separate entities - DTs probably
or
2. unit trust with corporate trustee and 4 separate entities owning.

Fund the structure by loaning money to it under a written loan agreement.

Consider the terms of the discretionary trusts - no default beneficiaries and open class probably.

Consider who should be director(s) of the company

And consider the effects of
a. death
b. incapacity
c. family law break up
d. bankruptcy
of
i) yourself
ii) any of the others

And also factor in what will happen if someone wants to leave - how, who, what and when and stamp duty, CGT etc