If your business owns valuable intellectual property (IP) such as trademarks, software or proprietary systems, holding it within your trading entity can expose it to unnecessary risk.
Separating your intellectual property from your business protects those assets from operational liabilities, enables efficient licensing and supports long-term commercialisation.
By transferring your IP to a separate holding company or trust, you can safeguard ownership while maintaining flexibility to license, assign or sell the IP in future.
This article explains how to separate intellectual property from a business in Australia, the key benefits of doing so and how to structure the change effectively.
What counts as intellectual property in a business?
Every operating business develops intellectual property over time. It can include:
- Trademarks, patents, and brand names
- Technology, source code, and digital platforms
- Formulas, processes, and confidential know-how
- Copyright in business documents, reports, and software
- Client databases, marketing materials, and proprietary designs
These intangible assets often become the most valuable part of a business.
Protecting them through a separate ownership structure ensures they are not exposed to day-to-day trading risk.
For more information on how intellectual property is defined and registered in Australia, visit IP Australia.
Why separate your intellectual property from your trading entity?
When your trading company owns the IP, that IP is automatically exposed to the company’s financial and legal liabilities.
If the business faces insolvency, a lawsuit or tax debt, creditors could access your IP or its associated goodwill.
By separating IP ownership, you can:
- Protect valuable intangible assets from trading and creditor risk
- Simplify future licensing, franchising, or sale of the IP
- Increase flexibility for investors or future restructuring
- Achieve clearer accounting and tax treatment for IP income
Benefits of holding intellectual property in a separate entity
Centralised ownership
A dedicated IP-holding entity can register, maintain and manage all IP rights in one place. This improves governance and provides a single point of control for enforcement or registration purposes.
Asset protection
Your IP is ring-fenced from operational risk. If your trading business becomes insolvent or faces litigation, the IP remains secure in a non-trading company or trust.
Commercialisation flexibility
Once separated, the holding entity can:
- License the IP to your trading company, related entities, or third parties
- Assign or sell the IP as required
- Receive licence fees or royalties in a tax-efficient manner
To learn more about commercialising your IP through third parties or related entities, visit our IP Licensing page and Licensing Intellectual Property article for guidance.
Tax efficiency
Licensing arrangements between your trading entity and the IP-holding entity can allow:
- Deductible licence fees for the trading entity
- Distribution of IP income to shareholders or beneficiaries at lower marginal rates
This can create a more tax-effective group structure while maintaining control.
How to transfer existing intellectual property
If your IP is already owned by your trading entity, you can still transfer it to a new holding structure.
The process typically involves:
- Conducting an IP audit to identify all relevant rights and registrations.
- Preparing an assignment deed to formally transfer ownership to the new entity.
- Updating registrations with IP Australia and other relevant authorities.
For detailed steps on the transfer process, visit our IP Transfer page.
Choosing between an IP company or trust
Both companies and trusts can hold intellectual property. The right structure depends on your commercial goals, tax profile, and risk appetite.
- A private company provides limited liability and a clear separation between ownership and control.
- A trust, particularly one with a corporate trustee, allows flexible income distribution to beneficiaries while still protecting the IP.
Selecting the correct structure is critical to ensure long-term asset protection and commercial efficiency.
To better understand how different ownership structures affect control, protection, and taxation of IP, see our Intellectual Property Ownership page.
For a complete overview of how we help clients register, protect, and commercialise IP, explore our Intellectual Property page.