Business Structure: Chapter 7 - Hybrid Structures and Business Groups
- Future Accounting
- 2 days ago
- 6 min read
Written by: Melissa Cunliffe (CA)
Why one business structure is often no longer enough
"One of the biggest signs your business has matured is when one entity can no longer comfortably do every job."
By now we've explored the four most common business structures used in Australia.
Sole traders
Partnerships
Companies
Family trusts
Each structure has strengths.
Each structure has limitations.
Each has situations where it performs exceptionally well.
But here's something many business owners don't realise.
The most successful family businesses often don't rely on just one structure.
Instead, they use a combination of structures, with each entity performing a specific role.
Rather than asking one entity to do everything, each entity is designed to do one thing well.
That is the foundation of a well-designed business group.
A different way of thinking
One of the biggest mindset shifts I encourage clients to make is this.
Stop asking:
"What is the best business structure?"
Instead ask:
"What is the job of each entity?"
That single question changes the entire conversation.
Because every entity should have a purpose.
If an entity doesn't have a clearly defined role, it's worth asking whether it should exist at all.
Likewise, if one entity is trying to do everything, it's worth asking whether it's being asked to do too much.
Think of your business like a football team
Every successful football team has specialists.
Forwards.
Midfielders.
Defenders.
A goalkeeper.
You wouldn't expect your goalkeeper to score every goal.
Nor would you ask your striker to spend the entire game protecting the net.
Each player has a role.
Business structures work the same way.
One entity might operate the business.
Another might own the commercial property.
Another might hold investments.
Another might act as trustee.
Together they form one team.
Each entity supports the others.
Future Prosperity Insight
The strongest business groups aren't necessarily the biggest. They're the ones where every entity has a clearly defined purpose.
What is a business group?
A business group is simply a collection of entities working together to achieve a family's commercial and financial objectives.
That group might include:
a trading company;
a discretionary family trust;
a corporate trustee;
an investment company;
property-owning entities.
Not every business requires multiple entities.
Many don't.
But as businesses grow, accumulate wealth and begin thinking about succession, the conversation often becomes less about choosing one structure and more about designing the right combination of structures.
The role of a trading company
Let's begin with the business itself.
The trading company generally performs one very important role.
It runs the business.
It:
invoices customers;
employs staff;
purchases stock;
signs contracts;
pays suppliers;
generates profits.
It is the commercial engine of the group.
Every day it takes on commercial risk because that's exactly what trading businesses do.
The role of the family trust
Notice something interesting.
The family trust doesn't necessarily need to operate the business.
Instead, it may perform an entirely different role.
It may:
own the shares in the trading company;
hold long-term investments;
own commercial property;
support succession planning;
preserve family wealth.
That's a very different job.
Instead of taking on day-to-day commercial risk, the trust focuses on long-term ownership and flexibility.
From Melissa's Desk
One of my favourite questions during a planning meeting is:
"If your business stopped trading tomorrow, what would you want your family to still own?"
The answer is rarely:
"The trading entity."
More often it's:
The commercial property.
The investments.
The family wealth.
That's why ownership conversations matter so much.
The role of commercial property
Commercial property deserves its own conversation.
One of the biggest decisions business owners make isn't whether to purchase premises.
It's who should own them.
Should the trading business own the property?
Should another entity own it?
Should the property be leased back to the business?
There isn't one correct answer.
But there should always be a conversation.
Once settlement occurs, changing ownership can become significantly more expensive.
Planning beforehand often creates far more flexibility.
The role of investment entities
As businesses become more successful, they often begin accumulating wealth outside the trading business.
Cash reserves.
Share portfolios.
Investment properties.
Other long-term assets.
At that point, many business owners begin asking a different question.
"Should these assets sit inside the same entity that is taking on day-to-day commercial risk?"
Again, every situation is different.
The important thing is asking the question before acquiring the asset—not years afterwards.
Why corporate trustees are so common
Earlier we discussed corporate trustees.
Now let's see how they fit into the bigger picture.
A corporate trustee doesn't exist to make profits.
Its role is governance.
It acts as trustee for the family trust.
This often provides:
continuity;
simpler succession;
clearer administration;
easier changes when family circumstances evolve.
It's another example of an entity performing one very specific role exceptionally well.
Business groups are about purpose
One of the biggest mistakes I see is adding entities over many years without reviewing why they exist.
A trust here.
A company there.
Another company a few years later.
Eventually nobody can clearly explain what each entity actually does.
Every entity should answer one simple question.
"Why do I exist?"
If the answer isn't obvious, it may be time for a Business Structure Review.
A practical example
Let's look at a typical family business.
Imagine the following structure.
Family Trust
│
Owns the shares in
│
Trading Company
│
Operates the Business
The Family Trust also owns:
Commercial Property
Long-term Investments
Investment Portfolio
Corporate Trustee
Administers the Family Trust
Notice what we've achieved.
Each entity has one job.
The company operates the business.
The trust owns long-term wealth.
The corporate trustee administers the trust.
No entity is trying to do everything.
The proposed trust taxation reforms
As we discussed in the previous chapter, the proposed reforms to the taxation of discretionary trusts reinforce an important planning message.
Good business structures should evolve as legislation evolves.
Historically, many businesses operated directly through discretionary trusts.
Depending on how the final legislation operates, some family groups may consider whether a different allocation of responsibilities within the business group better supports their objectives.
For example:
the company becomes the trading entity;
the trust retains ownership of long-term assets;
the trust owns the shares in the trading company;
investment assets remain outside day-to-day trading risk.
This doesn't mean everyone should restructure.
It simply means everyone should review.
Future Prosperity Insight
Good advisers don't recommend restructures because legislation changes. They recommend reviews because legislation changes.
The biggest mistake
One of the biggest mistakes business owners make is believing complexity equals sophistication.
It doesn't.
More entities don't automatically create a better structure.
Every additional entity creates additional responsibilities.
Additional compliance.
Additional administration.
Additional cost.
The objective isn't to have more structures.
The objective is to have the right structures.
Nothing more.
Nothing less.
From Melissa's Desk
I've never recommended adding an entity simply because someone else has one.
Every recommendation begins with exactly the same question.
"What problem are we trying to solve?"
Only after understanding the objective do we begin discussing structures.
Because structures should always support strategy—not replace it.
Preserve • Protect • Prosper
Preserve
Review your business group regularly.
As legislation, family circumstances and business objectives change, the role of each entity may also evolve.
Protect
Separate commercial risk from long-term family wealth wherever appropriate.
Every entity should have a clearly defined role.
Prosper
Well-designed business groups aren't built for today.
They're built for the next generation.
They create flexibility, improve governance and provide a stronger foundation for long-term success.
Key Takeaways
Many successful businesses operate through more than one entity.
Every entity should have a clearly defined purpose.
Trading activities and long-term asset ownership often have different objectives.
Proposed legislative changes reinforce the importance of reviewing business groups.
More entities do not automatically mean a better structure.
Ask Yourself
Can I clearly explain the purpose of every entity within my business group?
Is one entity trying to perform too many roles?
If I were designing my structure from scratch today, would I build it the same way?
Common Mistake
Adding entities over time without reviewing why they exist.
A business group should evolve deliberately—not accidentally.
Every entity should earn its place within the overall structure.
Planning Opportunity
Draw your current business group on a single page.
Write one sentence underneath each entity explaining its purpose.
If you struggle to explain why an entity exists, or if two entities appear to be doing the same job, it may be time for a comprehensive Business Structure Review.
3 P's Action Step
This week, sketch your business group on a blank sheet of paper.
Don't worry about making it perfect.
Simply map:
who owns what;
who operates the business;
who owns the major assets; and
how everything connects.
You may be surprised by how much clarity a simple diagram creates.
Book a Business Structure Review with Future Prosperity today and gain clarity on whether your current entities are still working together effectively.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
