Setting up a trust for your business usually comes down to a single line on a deed: who will be the trustee. You might be establishing a family trust to hold an investment property, moving an operating business into a discretionary trust, or buying into a structure someone else runs. The accountant asks for the trustee's name and it feels like the kind of detail you tick off without thinking. It is the opposite of a detail. The trustee is the legal owner of the trust's assets and the party that signs the trust's contracts, and if the trust's debts go unpaid, it is the trustee who is pursued. The choice between an individual and a company as trustee is one of those set-and-forget decisions that is cheap to make and expensive to reverse.
The two options, plainly
A trust is not a separate legal entity the way a company is. It is a relationship in which a trustee holds and manages assets for the benefit of beneficiaries. Because the trust itself cannot sign a lease, open a bank account or employ staff, the trustee does all of that in its own name, as trustee for the trust. That is why the identity of the trustee matters so much: the trustee is personally liable for the debts and obligations it incurs for the trust, subject to a right to be reimbursed out of trust assets. If the trust's assets do not cover the debts, the trustee's own assets can be pursued.
An individual trustee is a person, usually you or a business partner, appointed under the trust deed, with contracts and accounts held in that person's name as trustee for the trust. A corporate trustee is a proprietary company appointed as trustee, typically a special purpose company that does nothing except act as trustee. The company is the party on the documents, while its directors make the decisions. Framed that way, the choice looks like paperwork. It is really a decision about who wears the risk of the trust's activities and how easily the structure absorbs change. One point to flag up front: the options do not divide neatly into "personally liable" and "not liable". Lenders and landlords commonly ask the directors of a corporate trustee for personal guarantees, so both roads can end in personal exposure.
What to weigh up before you choose
There is no single right answer, but the factors below cover where the two structures genuinely differ. Work through them with your own situation in front of you.
Who answers for the trust's debts
Start with the worst case, because that is where the structures separate. With an individual trustee, the trustee is the debtor on every contract the trust enters. A supplier, landlord or lender that is owed money can sue the trustee personally, and while trust assets are the first port of call, the trustee's own assets are on the line if they fall short.
With a corporate trustee, the company is the legal party. Under s 124 of the Corporations Act 2001 (Cth), a company has the legal capacity and powers of an individual, so the trustee company can hold the assets and enter the contracts itself. That does not put the directors beyond reach. Directors owe the usual directors' duties, and under s 588G of the Corporations Act 2001 (Cth) a director can be personally liable where the company incurs a debt while insolvent. A company acting as trustee incurs the trust's debts in its own name, so the insolvent trading duty applies to its directors in the ordinary way.
- Individual trustee: creditors can pursue the trustee personally, and personal assets are exposed if trust assets are not enough.
- Corporate trustee: the company is the debtor, but directors can still be personally liable for insolvent trading, breaches of duty, and any guarantees they sign.
Keeping trust assets separate from your own
Asset protection is usually the reason business owners look past the individual option. With an individual trustee, the same person is both the operator of the trust and a private individual, and the boundaries between those roles tend to blur under pressure. With a corporate trustee, trust assets sit in the company's name, and the directors' personal affairs sit further away from the trust's dealings.
The structure does the most work when the trustee company is a special purpose company that does nothing else:
- Special purpose company: if the company's only business is acting as trustee, its creditors are effectively the trust's creditors, and there is no second pool of company assets for them to reach.
- No mixed activities: keeping the trustee company out of personal trading and personal borrowings preserves the separation.
- Realistic limits: no structure protects against personal guarantees, deliberate wrongdoing, or debts the directors incur personally.
What it costs to run a company trustee
The individual option looks cheaper, and on the surface it is. There is no company to register with ASIC and no annual review to keep up with. But the gap is smaller than it first appears, and it buys a different kind of admin.
A proprietary company trustee carries the standard company costs. Registration currently sits at around $611, and each year the company pays an annual review fee of around $330, a figure ASIC indexes each year. The annual review also involves checking that the company's details are current and passing a solvency resolution. None of that is onerous, but it is recurring, and it sits on top of the trust's own tax return and accounting work, which exist either way.
An individual trustee avoids those company costs, but a change of trustee later has its own price: new appointments, re-registering assets, re-papering contracts, and in some states duty on transfers of trust property. When a business is growing, the savings on an individual trustee are usually spent many times over at the first restructure.
What happens when people change
This is where the individual option gets uncomfortable, because the trustee is the trust. If an individual trustee dies, loses capacity, or becomes bankrupt, the trust does not end, but the trustee's role does. In Francis v Helios Corporation Pty Ltd [2022] FCA 199, the Federal Court dealt with a family trust whose individual trustee was made bankrupt and, as a result, ceased to be trustee. Someone has to be appointed in their place, and every asset, bank account, lease and contract held in the old trustee's name has to move across.
A corporate trustee absorbs the same events without changing. If a director dies, retires or steps back, the company stays as trustee and control shifts through the directors and shareholders. For family succession in particular, that is usually the difference between a quiet boardroom change and a full re-papering exercise.
One caveat: changing a trustee, or changing who controls a trustee, can itself have tax and duty consequences, depending on the state and the assets involved. That is territory where a lawyer and accountant should look at the specific structure before anyone signs.
What banks, landlords and suppliers will ask for
Counterparties care about who they can sue, which means they care about the trustee. Many lenders and landlords are comfortable contracting with "XYZ Pty Ltd as trustee for the ABC Trust", and some will not deal with individual trustees at all. The flip side is that the same lenders routinely ask directors of the trustee company to give personal guarantees, so the corporate structure does not automatically keep your name off the loan.
If the trust signs leases, employs staff, or runs credit accounts, also think about signing authority. With two or more individual trustees, every document may need every trustee to sign. With a corporate trustee, the company's constitution sets out who can sign, and the trust can keep operating when one director is unavailable.
What the trust actually does
Finally, match the structure to the activity. A trust that runs a trading business, employing people, selling to customers, and carrying real operational risk, is where the corporate trustee earns its keep. The company absorbs the contracting and the disputes, and the separation matters when something goes wrong. A trust that passively holds a share portfolio or a single investment property, with minimal contracting, can work with an individual trustee, particularly if the exposure is modest.
Even for a passive trust, weigh the future. If children or partners will come into the structure, or if the asset will be sold or refinanced, the change-friendly corporate structure is often worth the modest annual cost.
How an Artificer Legal lawyer helps you choose a trustee
Most people make this decision in the abstract, which is exactly when it goes wrong. An Artificer Legal lawyer will make you work through it concretely. That means reading the trust deed to check who can appoint and remove trustees and whether a corporate trustee is permitted at all, stress-testing the decision against scenarios such as a large claim, a bankruptcy, or a relationship breakdown, and modelling who is actually exposed under each option, including under guarantees and the insolvent trading provisions.
If you have already chosen, the work shifts to doing it properly: drafting the deed of appointment, making sure the trustee company is set up as a special purpose vehicle, checking the constitution and who can sign, and coordinating with your accountant on the tax and duty consequences of the change. Bringing the trust deed, any loan or lease documents, and a rough idea of the trust's assets and activities is enough to start the conversation.
Who wears the risk when the trust fails
The question that should decide this is not which option is cheaper this year. It is which option leaves the right assets exposed if the trust's biggest liability materialises tomorrow. The individual trustee saves a few hundred dollars a year in ASIC fees and spends it the first time the trust needs to change trustee or defend a claim against personal assets. The corporate trustee costs more to run, but it keeps the trust's affairs in the company's name and lets the people around the trust change without breaking it.
Whichever way you lean, the trustee is the legal operator of the trust: the person or company that holds the assets, signs the contracts, and answers for the debts. An individual trustee is cheaper and simpler up front but carries personal exposure and clunky succession. A corporate trustee separates the trust from the people who run it, survives changes of directors and shareholders, and is generally the stronger fit for a trading business, at the price of registration and annual fees, ongoing company compliance, and the reality that directors can still be personally liable under guarantees and company law. A lawyer and an accountant looking at the specific trust will tell you which of those trade-offs matters in your case.