Should Your NZ Business Use a Trust Structure? A Guide for New Company Owners
A family trust is one of the most common asset protection structures for NZ business owners. Find out whether you need one, what it costs, and how to set it up.
What Is a Trust and Why Do NZ Business Owners Use Them?
A trust is a legal structure where assets are held by a trustee for the benefit of beneficiaries. In NZ, family trusts are commonly used by business owners to:
- Protect personal assets from business creditors if the company fails
- Manage income tax by distributing income to beneficiaries on lower tax rates
- Plan for succession and passing wealth to the next generation
- Protect relationship property in the event of a separation
The key distinction: your company is liable for its own debts, but assets held in a family trust are generally protected from company creditors, provided the trust was set up legitimately and not to defraud creditors.
Do You Need a Trust as a New Company Director?
Not every new business needs a trust. Consider one if:
- You are in a high-risk industry (construction, professional services with liability exposure, hospitality)
- You have significant personal assets (a home, investments, savings) you want to protect
- You expect the business to generate meaningful profits over time
- You have a family and want to plan for their financial future
If you are just starting out with minimal personal assets and low business risk, a simple company structure may be sufficient for now.
How to Set Up a Family Trust in NZ
Setting up a trust requires a lawyer to draft a trust deed. Key decisions include:
- Trustees - usually the business owner plus a professional trustee (e.g., an accountant or lawyer). The professional trustee adds independence and compliance oversight.
- Beneficiaries - typically the owner, spouse, and children. Can include discretionary (flexible) or fixed distributions.
- Initial asset transfer - assets transferred into the trust at below market value may trigger Gift Duty implications; your lawyer will advise on structuring.
Costs typically range from NZ$1,500 to NZ$3,500 for a straightforward family trust, plus ongoing administration costs (trust meetings, accounts, tax returns).
The Link Between Your Company and Your Trust
A common NZ structure is for the family trust to own the shares in the company. This means profits distributed as dividends flow to the trust and then to beneficiaries. Your accountant can advise on the most tax-efficient structure for your situation.
Get Connected with a Trust Lawyer or Accountant
Setting up a trust is a legal and tax decision that requires professional advice. FreshFirms can connect you with a commercial lawyer or accountant in your region who specialises in trust structures for NZ business owners.
Find a business lawyer near you or connect with an accountant who specialises in trust structures.