Knight & Taylor are siblings who came to Australia from Germany for starting their business. They started the business with $500,000. They partnered with indigenous communities and small farmers to source native Australian plants to make teas and other associated products that marry the traditional medicinal use of native Australian plants with scientific research. They operated only from a few strategic stores but mainly sell wholesale and online. After three years their business has exceeded their expectations and they are now selling their products globally. They have more than 40 permanent staff employed.

They now want to start taking some of their profits from the business and start building their own wealth separate from each other. They are both thinking of investing in blue chip share portfolios. They have each taken $200,000 from the business for this purpose and propose to take a further $50,000 a year each for this purpose. They intend using these funds for personal purchases, for example buying a house or funding children's education.

They have contacted you for advice as to what structure they should start their share portfolios. They are aware they can use any of the following:

a) trust

b) partnership

c) sole trader

d) company

e) superannuation fund

They specifically want you to analyse the appropriateness of each of the potential entity structures with regard to:

i. flexibility,

ii. tax effectiveness,

iii. asset protection against legal liability, and

iv. ability to draw down funds.

Your answers should include appropriate legislation, cases, or ruling references.

Requirement

Advise Knight & Taylor in the form of a letter. Discuss the benefits of recommended structure against rest of the four structures.