Tuesday, February 19, 2013

How do business, or goodwill, licences work?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘How do business, or goodwill, licences work?’. If you would like a link to the video please let me know.

As usual, a transcript of the presentation for those that cannot (or choose not) to listen to the presentation is below –

The key idea, and it’s probably not dissimilar to some sort of service trust arrangement, is having the two arms of the business being conducted by different entities.

An example, particularly for those that are currently in a partnership of individuals is that if the right to run the business was able to be utilised by someone else or by another entity, for example a partnership of trusts, then there's arguably the ability to create a licence arrangement that would say that the partnership of trusts has the ability to do everything to conduct the business and to enjoy the fruits of conducting the business, the income that’s generated for the payment of invariably a relatively nominal fee back to the actual original owners of the business.

Now the idea of that arrangement obviously, particularly from an asset protection perspective is that, if you can get the risks associated from running the business away from the individuals, that’s obviously a very attractive thing.

It also gives the partners the ability to think a little bit strategically about how they would want that income derived. So in other words, rather than earning the income in their own name, they have the ability to earn it through a company or trust environment.

Until next week.