Posted June 27, 2024 by James Billings
We need to have a short talk about the states requiring registration of your business trust. While some states like California do not mandate it, others do.
Registration Requirements in Various States
If you’re setting up in a state that requires registration, understanding when and how to maintain privacy is crucial. For instance, running a business with a physical presence and customer interactions will typically necessitate registering your business trust to comply with state laws.
Defining “Doing Business”
The key to determining the need for registration lies in the definition of “doing business” within the state. This term dictates whether you must register your business trust based on your activities.
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.
What Counts as “Doing Business”?
Engaging in activities like having a storefront, employing residents, or direct trading within the state usually qualifies as doing business. However, mere financial transactions like opening a bank account may not fall under this category, thus exempting you from registration.
Exemptions and Non-Business Activities
Understanding what activities do not constitute doing business can save you from unnecessary registration. For example, maintaining an investment account or handling buy-sell transactions typically does not equate to doing business.
Practical Examples
If your interactions within a state are limited to non-commercial activities, you might not need to register your business trust. This can apply to situations where you’re merely investing or managing assets without a physical business operation.
Conclusion
It’s essential to research and understand the specific requirements and exemptions in the state where you plan to operate. Look up the legal definitions and consult resources to ensure compliance while optimizing your business structure.
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.