So, the idea of setting up a trust to hold your shares might sound like one of those “later” tasks. But here’s the thing: sorting this out early can save you a whole lot of hassle (and money) down the track.
Let’s talk about why it might be one of the smartest moves you can make—especially if you’ve got a big exit in your future.
More Flexibility When You Exit (or Issue Dividends)
Imagine this: your startup takes off, and a few years down the road, someone makes an offer you can’t refuse. Or maybe you’re heading for an IPO. Sounds exciting, right? But if you’re holding your shares personally, selling them could mean an immediate, and personal tax hit… at your own tax rates.
If, instead, your shares are sitting inside a trust, you’ve got more options. You can plan ahead, spread the income out to other people in your family, or even other entities—typically providing the potential to manage the tax more efficiently.
Typically, you’d set up a discretionary trust where you include broad definitions of the types of (typically family) beneficiaries that might receive some of the moola. But here’s the important part: you can change beneficiaries on the fly, again for potentially more favourable tax treatment. If the shares are held in your personal name, you’ve got no choices.
Oh, and while most startups are aiming for an exit, the same applies to any dividends that might be distributed because these, too, go to whomever the shareholder is.
Bottom line? Trusts give you options. And options are gold when it comes to exits.
“Setting up a trust to hold your shares isn’t just a tax strategy—it’s about giving yourself the flexibility to make smarter decisions when it matters most.”
— Remco Marcelis, CEO and Founder, Standard Ledger
Other Benefits
Just quickly, there’s a couple of other benefits to also be mindful of:
Asset Protection. If “things” go pear-shaped in business, you might find yourself being sued (it’s almost inevitable that someone will at least try it on). When someone goes you, they might make a claim against the company, the directors, and ultimately even the shareholders. Having a trust as your shareholder just gives something else to hide behind.
Succession Planning. No one really likes to think about the “what ifs,” but they’re important. If something happens to you, what happens to your shares? If they’re held in your own name, your estate has to go through probate—which can be slow and messy. Holding your shares in a trust means you can decide exactly who gets what and when. It’s all laid out ahead of time, and things are generally a lot smoother for everyone involved. If you’ve got a partner, kids, or people you want to look after, this makes things way simpler and more secure.
And if you’re wondering what else to get right early on, check out our guide to setting up your startup’s financial foundations. It covers the structures and strategies that set you up for success.
Yes, There Are Some Costs – But They’re Not Huge
Okay, let’s talk real-world stuff. Setting up a trust isn’t free, but it also is fairly common and so costs should be reasonable. You may need a lawyer to draft the trust deed (and make sure they don’t charge for something that is largely standard), and Standard Ledger will need to file an annual tax return for it. There’s a bit of admin to stay on top of, and a small extra cost each year.
But honestly? For most founders, those costs are peanuts compared to the value of having a more flexible, future-ready setup. Think of it as buying peace of mind (and a bit of long-term tax strategy) at a relatively low price.
And if you’re paying yourself from your startup, there’s a smart way to do that too. We break it down in plain English, without the fluff.
Get In Early or It Gets Tricky
Here’s the kicker: once your startup has raised capital or grown in value, shifting your shares into a trust can become complicated—and expensive. You could be up for capital gains tax (CGT), and you might even need board or shareholder approval.
But if you get in early—like, when you’re first issuing founder shares—everything’s way simpler. No messy paperwork, no big tax bill, and no chasing approvals.
While we’re on it, if you’re thinking about giving equity to early employees or advisors, check out our article on share options versus shares. It could save you a future headache.
Also, if cash flow is already tight, and you’re weighing up every spend, our guide to stabilising your startup’s cash flow is worth a look.
Final Thoughts
At the end of the day, setting up a trust for your shares isn’t just about tax. It’s about options. We see most founders making the upfront decision to create a trust, weighing up a small-ish upfront cost and small-ish annual costs for that future flexibility.
It’s definitely worth chatting to Standard Ledger or a lawyer to figure out if it suits your situation. But if you’re building something big, it’s worth building the right structure around it too—at the start before it’s too late or too expensive.
What’s Next
If you’re still unsure about whether a trust is right for you, we’ve got your back. At Standard Ledger, we specialise in helping founders set up the right structures from the get-go. Check out our Company/Trust setup service for more details.
Or just book a quick chat with us – no pressure, no jargon, just practical advice.
