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Can a Trust own and manage my business?

Can a Trust own and manage my business? The short answer – yes, it can; however, there is more to it. Trusts can own businesses and manage them for the benefit of your heirs, but there are nuances to consider.

S-Corp thoughts/considerations. For example, if your business is an S-Corp, you avoid corporate taxation, double taxation, because the shareholders receive the income and losses from the business (S-Corps are “pass through” tax entities). In other words, the business income gets treated like personal income for the shareholders, although certain exceptions apply. An S-Corp:

  1. Has fewer than 100 shareholders (family members and estates are treated as one shareholder);
  2. Does NOT have a shareholder that is not an individual (except for certain types of Trusts, and certain exempt organizations, such as a 501c3);
  3. Does NOT have nonresident aliens as shareholders; and
  4. Has only one class of stock.

The take away. A Trust can own and manage a business for the benefit of your heirs; however, there are specific nuances to consider, such as limiting S-Corp status to certain types of Trusts. If you would like to consider Trust based ownership-management, meet with your Estate Planning lawyer to discuss the specifics.

 

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Guest Friday, 18 August 2017