A key difference between a trust and a company is that a trust is not a separate legal entity. However, under a company, you may be able to have better asset protection, gain greater working capital and investment opportunities, as well as a longer life span.
Is trust a limited company?
A limited liability company (LLC) is a legal entity formed under state law. A trust is not a legal entity. It is a fiduciary arrangement under state or federal law for the preservation of principal. It allows a trustee to hold assets on behalf of beneficiaries.
How is a business trust different from a corporation?
The use of a business trust originated many years ago as a way to circumvent restrictions placed on real estate development and corporate acquisitions while keeping the desirable limited liability feature of a corporation. Business trusts differ from corporations because they derive their status from the voluntary actions of the people who form it.
What are the differences between a REIT and a business trust?
Despite both a REIT and a Business Trust owning the same type of asset, there are multiple differences. The main difference between the two is that a REIT is involved in real etate whereas a Business Trust is not restricted to real estate and can operate in any field.
Who are the beneficiaries of a business trust?
In general, beneficiaries of a business trust have limited liability. If the particular state does treat a business trust as a partnership, the beneficiaries could be fully liable for any judgments made against the trust. There are several different types of business trusts to familiarize yourself with:
Do you need a business trust or LLC?
Most experts, however, recommend you consider further protecting your assets through the establishment of a business trust or a limited-liability company (LLC). Creating a legal entity that acts on your behalf for investments is a protective trading strategy. (Yes, the Internal Revenue Service (IRS) allows for this type of strategy.)
