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A business trust is a legal organization managed by trustees for the benefit of one or more beneficiaries. It protects assets from creditors and lawsuits and can provide tax benefits. Corporate trusts are alternatives to corporations or partnerships and are formed through statements of trust. Trustees hold title to the trust property and administer it according to the statement of trust. Each beneficiary receives a certificate of beneficial interest.
A business trust is a legal organization set up for the control and management of assets and property. This type of trust has trustees who take responsibility for managing the assets in the trust. Trustees manage assets not for their own gain and benefit, but for the benefit of one or more beneficiaries. To be considered a business trust, this trust must have business activities, such as investing or buying and selling products. The person or group of people who create the trust is referred to as the grantor or liquidator.
Also called a common law trust, a business trust essentially becomes the owner of the assets within it. Your beneficiaries, however, may receive your profits or income, and ultimately, your beneficiaries may receive asset disbursements. Meanwhile, this type of trust provides a way to protect business assets from creditors and lawsuits. Depending on the laws of the jurisdiction and how the trust is created, it can provide protection from certain types of taxation as well.
Corporate trusts are often discussed in relation to corporations and partnerships. These trusts are not incorporated and are typically created as alternatives to corporations or partnerships. The trust can conduct a wide range of activities, including investments, purchases and sales, but offers beneficiaries a limited level of responsibility; a corporate trust may even invest in stocks, bonds and similar investment instruments. Unlike corporations, these trusts are not chartered by the states in which they form. Instead, they are formed through the creation of statements of trust, which their grantors voluntarily sign.
As with other trusts, trustees hold title to the trust property for the benefit of its beneficiaries. They administer the trust under the terms set out in the statement of trust. This document provides the information necessary for trustees to manage the trust according to the wishes of the person or group of people who created it. List how long the trust should last, what the duties of trustees are, and what level of authority trustees have. This document also describes the beneficiaries’ interest in the trust.
Each beneficiary of a commercial trust receives a document referred to as a certificate of beneficial interest. This is to show how much interest a beneficiary has in the trust. If desired, a beneficiary can transfer its interest to another party.
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