Posted June 26, 2024 by James Billings
Today, we delve into the basic maintenance differences between corporations vs business trusts, focusing on the paperwork and state requirements.
Understanding State-Sanctioned Entities
Requirements of Corporations and LLCs:
In the realm of state-sanctioned entities like corporations and LLCs, several requirements are mandated by the Secretary of State. These include name registration, listing of directors or managers, and having a resident agent. Corporations, and to a lesser extent LLCs, also require annual record-keeping and payment of a franchise tax to the Franchise Tax Board in California, irrespective of business profitability.
Maintenance Demands
Annual Upkeep for Corporations and LLCs:
Large corporations, like Walmart, utilize business trusts for holding title to their properties, highlighting the trust’s effectiveness and reliability. A look into the Walmart Real Estate Business Trust provides insights into strategic asset management by major players.
The Business Trust Alternative
Advantages of Using Business Trusts:
In contrast to corporate entities, business trusts offer a simpler setup. Once established, there’s no need for registration with the Secretary of State, no franchise taxes, and no obligatory record-keeping. This form of organization allows for holding title with minimal statutory obligations.
Visibility Factor and Privacy Concerns
Reduced Visibility with Business Trusts:
One significant advantage of business trusts over corporations and LLCs is the reduced visibility. Unlike state-registered entities, business trusts don’t have public records that expose personal details like emails, addresses, and phone numbers, reducing potential risks.
The Difference in Operation
Flexibility of Business Trusts vs. State Regulations on Entities:
While state regulations dictate the operation of corporations and LLCs, business trusts offer freedom in design and operation, devoid of state-imposed restrictions.
Summary and Conclusion
Why Opt for Business Trusts:
We advocate using trust structures for holding titles to assets such as businesses, real estate, or antiques. Trust instruments allow these assets to hold legal title independently and remain off the public radar, providing an invaluable invisibility factor and eliminating maintenance hassles.
Get your free copy of the LLC versus Business Trust comparison chart here.
If you have any questions, please contact James Billings, founder and owner of TrustArte, at james@trustarte.com or 619-537-8625. Visit my YouTube channel for video content.