So you have that friend who always has “brilliant business ideas”.
This time, the idea is to put the company in a trust.
On paper, it sounds clever. Asset protection. Estate planning. Flexibility. Maybe even the sense that the structure is somehow more sophisticated.
Sometimes there are valid reasons to use a trust.
But this is also where people focus on the upside and miss the admin, cost, and compliance consequences that come with it.
One of those surprises is that the company may no longer be treated as owner-managed for annual financial statement purposes. That matters because owner-managed profit companies generally do not require an independent review, while companies that are not owner-managed may need one depending on their public interest score and how their financial statements are compiled.
Why the trust changes the picture
Once a trust sits as the shareholder, the company is no longer as straightforward as a normal owner-managed company.
That can mean an extra compliance layer that business owners did not budget for. In practical terms, what looked like a smart structure can end up creating:
- more admin
- more professional fees
- more annual compliance friction
And that is before getting into the tax side.
There is also the section 7C issue
If money starts moving between connected people, trusts, and companies, interest-free or below-market interest loans can become another headache.
That is where section 7C may come into play. It is a rule aimed at certain loan arrangements involving trusts, and it can create tax consequences where funding is provided on interest-free or below-market terms.
That is a separate discussion on its own, and one worth unpacking properly in another article.
The real takeaway
A trust-owned company is not automatically a bad idea.
But it is also not something to set up jus t because it sounds clever at a braai.
Sometimes the hidden cost is not the headline tax issue. Sometimes it is the extra compliance requirement that quietly shows up every year.
And if the company is no longer treated as owner-managed, an independent review may be one of those costs.
Thinking of putting a company in a trust? Speak to us first to understand the compliance, reporting, and tax consequences before you commit to the structure.
Disclaimer: This article is for general information only and does not constitute tax, legal, accounting, or structuring advice. Whether a company is owner-managed, whether an independent review is required, and whether section 7C applies will depend on the specific facts, ownership structure, public interest score, and the relevant legal rules.
