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Mortgage broker business structure

Discussion in 'Property Finance' started by Daniel Taborsky, 21st Feb, 2016.

  1. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    Question for the mortgage brokers out there... I'm in the process of starting up a mortgage broking business (I have a tax law background) and I've been thinking about what legal structure to use. My thought was to run the business within a new company owned by a discretionary trust, but I would be interested to know what structure other brokers are using?

    Cheers, Dan
     
  2. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Am set up as you are considering :)
     
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  3. Redwood

    Redwood Well-Known Member

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    Hi

    Will depend on a few things. I have a group of companies, each with shares owned by a discretionary trust.

    Cheers Ivan
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Mine's a company owned by a discressionary trust, it works quite well.

    That said, given my time again, I'd use a direscretary trust to hold my aggregator agreement and license, then use a company to sub-contract broker services to that trust. Essentially setting up a sub-aggregation model.
     
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  5. beachgurl

    beachgurl Well-Known Member

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    Mine is set up that way
     
  6. God_of_money

    God_of_money Well-Known Member

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    can some one enlighten me the reason of setting up company owned by discretionary trust? for my learning purpose.. thanks
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Limited liability with company.
    Ability to transfer shares
    Easy to add partners
    Asset protection with assets owned by a trustee
    Tax flexibility
     
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  8. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    Thanks all.

    @Redwood What is the reason for multiple companies (if you don't mind me asking)? Regulatory requirements?

    @Peter_Tersteeg What would be the benefits of a sub-aggregation model?
     
  9. D.T.

    D.T. Adelaide Property Manager Business Member

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    Might I ask why?
     
  10. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Allows for future expansion of the business with other brokers, especially those in a mentoring relationship as opposed to an employment relationship. It keeps payment by lender somewhat independent of the brokers business itself. Thus if there's more than one broker in the business, there's less exposure to each other.

    There's quite a few things I'd do different in terms of structuring my business, but they're things that you wouldn't think about unless they were part of your business plan right from the beginning (sub-aggregation is almost never part of the plan, and it's never needed for most brokers).
     
  11. Redwood

    Redwood Well-Known Member

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    Daniel,

    We have different businesses each with their own purpose, each entity has its own structure, trading name - bank account - branding. Why? asset protection mumbo jumbo - more just keep everything separate including email addresses believe it or not. I hope I never need it, but another thing is expansion later on.

    I like Pete's suggestion.

    Cheers Ivan
     
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  12. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I should stress that my ideal structure is probably complete overkill for almost all brokers. I know a few brokers that would have liked to have done things this way, but most would simply never use that structure to its full potential as it tends to involve a very specific direction for a business to take, along with a specific set of circumstances that doesn't existin in todays market, and might or might not in the future.

    It would probably cost an extra $2000 - $3000 in the initial setup and another $1000 - $2000 per year to administer. A bit wasteful if you're never going to need it.

    My existing business structure appears to be very similar to Terry's and I'd say it works quite well to meet the needs of most brokerages. For me this is one of the few things I'd do differently but going back 12 years I don't know how I or those advising me might have anticipated this need.

    I'd be happy to discuss directly with anyone setting up a MB business, but the details and explainations are fairly boring and technical so I'm not going to go into detail here.
     
    Last edited: 22nd Feb, 2016
  13. miximitosis

    miximitosis Well-Known Member

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    Hi guys,

    I'm also looking at launching around September this year.

    My partner is also self employed in an industry not so likely to be sued. Our accountant has suggested it would be benefial tax wise and asset protection wise to have a discretionary trust where my partner and I are beneficiaries. He has then suggested that my partners business (and subsequent income) is owned by the trust whereas my mortgage broking business would be operated through a seperate company (where I'm the sole director) with dividends paid to the trust.


    Does this sound ideal in your humble opinions?
     
  14. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    Why is he recommending that your partner's business is carried on by the trust, instead of through a separate company owned by the trust? Is your partner's business profitable?
     
  15. miximitosis

    miximitosis Well-Known Member

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    Any suggestions or thoughts on this recommendation guys?

    I think just for simplicity and reduced costs. She is a sole trader currently in a low risk industry.
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If the business is sued it will be the trustee and assets of the trust that are at risk. If the trustee also owns shares in a valuable company this company would be at risk.
     
  17. miximitosis

    miximitosis Well-Known Member

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    Thanks @Terry_w . So it would be of benefit to have my partners business operated through a separate company also?

    Do you agree with how the accountant has suggested structuring my business?
     
  18. Northy85

    Northy85 Well-Known Member

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    Reading this thread just makes me believe that our tax and legal system is too complicated.
     
  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes it would benefit in terms of asset protection and other areas too - branding, sale potential etc. You have to weigh up the costs v benefits of having another company.

    I know nothing about your situation or the proposed structure of the companies and trusts your accountant has suggested so I can't comment.
     
  20. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Try reading some technical stuff. The system is way to complicated and this just drives up the price of advice.
     
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