Your Business Trust is Private and Powerful
Are you searching for the best way to organize your new business? Or maybe improve your current operating structure? Many people are familiar with the most common business organizations — the corporation, LLC, and the partnership.
But here you have a powerful new alternative, the private Business Trust.
A Business Trust combines the best features of a corporation, llc and partnership all in one. Yet it’s much less hassle – no secretary of state registration, no fees, no resident agent, and no state permission. It can operate in California or nationwide. And your Business Trust is completely private.
Many small to medium size business owners like you are looking for a fresh alternative to government sponsorship. It’s exactly what happened to us. After years of operating corporations and LLCs we found the Business Trust solution when analyzing how best to organize a property management company.
What is It?
A Business Trust is recognized as wholly, valid and legal form of business organization, with the right to do business, hold and convey real estate, make contracts and enforce its rights in court.
Low Profile Privacy
Unlike a corporation, LLCs or partnership, a business trust is totally private. It has no secretary of state filing requirements. It does not appear in any public online database. This means your business name, address and owners are confidential.
Read the financial news and you’ll see Business Trusts are used extensively in Singapore, the United Kingdom, Australia, South Africa, and India. The Romans used a trust form 2000 years ago, fideicommissum. English trusts in the 1600’s were another phase of trust evolution and applications.
Since 1940 in the United States, mutual funds such as Vanguard organized as Business Trusts. Their industry holds trillions of dollars of assets. Rockefeller’s infamous Standard Oil was a maze of business trusts. In the 1960’s real estate investment trusts became popular and remain so today.
In America many professionals — including most attorneys — have little or no understanding of them. None of the leading casebooks on business organizations or business associations cover the business trust. Law school curriculum is focused entirely on trusts and estates for wealth transfer. No references to business.
Like the other kinds of trusts described on this site, business trusts have a long history. In our litigious and open society, they are becoming an increasingly popular way to organize a business because of their combined benefits and unique privacy factor.
Federal and state authorities retain the power to tax in your chosen domicile. However, with a Business Trust you have great flexibility (3 ways) in how you are classified. You can be taxed as – a partnership, trust or corporation.
For reduced audit exposure, the trust (Form 1041) method allows profits and losses to flow through to the shareholders on K1 schedule. Isn’t this is a low profile way to avoid audit on Schedule C or Form 1120? This tax classification can also avoid the $800 franchise tax in California.
When taxed as a corporation (Form 1120), you can get the benefit of retained earnings. And unlike other trusts described on this site, a Business Trust can file Chapter 7 and 11 of the Bankruptcy Code.
Ask your accountant and/or see Treasury Regulations 301.7701 for more details.
Less Costly than LLC or Inc
Establishing your Business Trust is easier than a corporation or LLC. Over the years, it also costs less, requires less paperwork, zero state fees, has many fewer legal requirements, allows you greater flexibility, and offers excellent tax options.
Corporations and LLCs are paperwork-intensive, and can take weeks to fully set up. Naming conflicts do occur. With these organizational models, you incur ongoing fees, filings and disclosures with the secretary of state in whatever state(s) you do business. Over ten years these mandatory obligations can easily cost you $15,000 in expenses. And these hard costs exclude the value of your personal time.
Your Business Trust avoids all of these state regulatory hassles and expense.
In return for adhering to the many state rules and regulations of the corporation and LLC models, companies are granted certain statutory protections. But should it fail to follow any of the many requirements to the letter, the so-called “corporate veil” (liability protection provided by the legal entity) is pierced. This can render the partners, directors, and stockholders unprotected and personally liable. Most of the time everything is okay but if challenged, you best have everything in order.
Your Business Trust is based upon common law and legally operates with a minimum of state regulation. The participants, trustees and beneficiaries, still possess a great many benefits and safety protections. It remains a prudent business practice to keep detailed records according to the original trust agreement.
No Resident Agent
States require Corporations and LLCs to maintain a “resident agent” for legal service. The agent resides in the state where the company is chartered and is required by law to accept legal papers served upon the corporation or LLC. Attorneys like the resident agent requirement because it makes it easy for them to file legal papers (lawsuits) against your company or LLC.
Business Trusts do not have resident agents nor do they have any address requirements. Attorneys looking to sue a private business trust must first locate and identify the current trustees. This can be difficult, expensive and time consuming. It’s not our job to make it easy for them.
Reduced Liability for Shareholders
In the conventional corporation structure, the stockholders are the de facto legal owners. The officers are agents of the stockholders which can cause liability. Although a stockholder of Google is unlikely to have problems, in a small corporation they are at greater risk because of state compliance issues.
In a Business Trust, the trustees are the legal owners. They are not agents of the shareholders. Yet they have a fiduciary responsibility to the shareholders. Provided that the trustees manage the business without interference, the shareholders liability is little to none. This one fact alone is important to many people.
From an estate planning standpoint because the trustees are the owners, there is no probate, no transfer of ownership, no disclosure of assets, and no estate taxes.
Note: Corporations have stockholders and Business Trusts have shareholders.
Greater Financial Flexibility
In the corporate structure, the company may only pay dividends to stockholders. With the Business Trust, the Trustees may distribute dividends, capital gains, or none to the shareholders. The financial mission of a Business Trust has greater flexiblity.
A few states such as Delaware offer Statutory Business Trusts. They are primarily designed for corporate finance and required if a public traded company. They are registered with the Secretary of State.
Remember, the statutory trust and corporation are both artificial persons created by the state having no rights. Your common law Business Trust is a natural person, with all the rights of an individual.
Depending upon the type of business you operate, you may need a local business license.
“…a business trust is a citizen of every State in which its shareholders reside…” Navarro Savings Assn v. Lee – No 79-465 United States Supreme Court (1980)
We Are Your Business Trust Source
A business trust is the best way to establish your small to medium sized business. It offers you many savings and benefits including your comprehensive privacy. It can operate in conjunction with many of the other trusts offered by Trustarte. Doesn’t a Business Trust make sense for your new business?
Comparison: Business Trust vs. Corporation
||Simple and Swift Setup||✓||Avoids separate registration of your business in each state where you do business||✓||Avoids Secretary of State Registration||✓||Avoids Resident Agent Requirement||✓||Avoids public discourse||✓||Invisible to Public Online Databases||✓||Taxed As Corporation, Trust or Partnership||✓||Avoids Prepaid Franchise Taxes in California||✓||Avoids annual paperwork filing||✓||Avoids annual fees in each state where you do business||✓||Avoids annual meetings of shareholders, trustees, officers||✓||Avoids statutory fees to generate||✓||Avoids Personal Liability of Shareholder||✓||
To Learn More Details, Go to the Business Trust Comparison Page
Tap into the Unique Power of Trusts
To tap into the unique power of trusts for ensuring a secure financial future you need an expert, and we are the experts across a broad range of infinitely valuable private trusts. TrustArte is here to personally assist you. We’re here to educate you. We’re here to give you the financial privacy you not only deserve, but need.
Our Philosophy – Investment advisers, attorneys, accountants, hedge fund managers, family offices and individuals seek out James to design effective solutions for clients. This “open architecture” philosophy, which is reflected throughout our organization results in closer professional relationships.