Can a Living Trust Own a Business?

By Melanie Jo Triebel

For small business owners, estate planning is crucial to ensuring that operations continue after their death. Although the law varies slightly from state to state, a living trust is generally one form of estate planning which can aid small business owners in this process. An online legal document service can assist you in determining if a living trust is right for you and establishing such a trust to protect your business and loved ones.

Trusts as Business Owners

Simply put, a living trust can generally own a business. Many small business owners use living trusts as an estate planning tool to ensure that they and their families are protected in the event of death or disability. If you transfer the business to a living trust, the management changes which occur upon your death can be easily and smoothly accomplished via the trust itself.

Trusts as Owners of Business Assets

Living Trusts can also own an interest in a business or certain assets of the business. For example, a living trust can own shares in a business or can own the real estate on which a business is located. However, in small business structures such as partnerships and LLCs, the partnership or LLC agreement itself may prohibit a part owner from transferring his interest in the business to a trust. Check your agreement carefully before you begin the trust process.

Protect your loved ones. Start My Estate Plan

Advantages

A living trust is a legal mechanism that lets you put your estate plan into action prior to your death. When you transferr your ownership interest in a business to a living trust, your heirs can avoid an extended probate process regarding ownership of the business, avoid certain estate taxes, and keep information about the business out of the public record. Unlike a will, a living trust also protects you should you become disabled and unable to manage your business during your lifetime.

Types of Living Trusts

You may choose to protect your business using either a revocable or irrevocable living trust. An irrevocable living trust, which is often simpler and less expensive to create, is not generally subject to change. Once your business is in the trust, you cannot change your mind, except in certain specific circumstances that vary by each state. A revocable living trust, however, can more easily be altered or undone if circumstances change.

Protect your loved ones. Start My Estate Plan
Can a Living Trust Be a Member of an LLC?
 

References

Related articles

How Can I Pass My Farm on to Heirs?

Whether inherited from your relatives or acquired during your lifetime, several factors may influence your decision regarding the method you choose to convey a family farm to your heirs. Future tax consequences may arise based on the profitability or value of your farming business, as well as the difference between the value of the land when you purchased it and the value when your heirs acquire the property. You may desire to discuss estate tax consequences or the impact of capital gains taxes with your accountant prior to determining which method to choose.

How to Modify a Living Trust

A living trust is a legal document that can benefit you and your beneficiaries during and after your lifetime by implementing a plan for managing your assets. However, situations may arise in which you find yourself needing to modify your living trust after it has been created. For example, you might sell some of the assets held in the trust or you might marry, divorce or have a change of heart about one or more of your beneficiaries. You can modify a living trust by drafting and executing an amendment to the trust. The laws of each state differ as to how this procedure is accomplished.

Can You Place a Sole Proprietorship in a Revocable Living Trust?

The primary purpose of a revocable living trust is to pass property to heirs without a probate proceeding. A sole proprietorship is an unincorporated business owned by a single person and, as with most other assets, a sole proprietorship can be transferred to a revocable living trust. Transferring a sole proprietorship to a revocable living trust ensures that the beneficiaries of the trust receive the business after the death of the trust creator.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help. Wills & Trusts

Related articles

Family Trust Vs. LLC

A family trust and a limited liability company, or LLC, are both created under state law, but they are two very ...

LLC Vs. Irrevocable Trust

A limited liability company, or LLC, is a business entity to which property can be gifted and managed. An irrevocable ...

Can an LLC Be an Individual or Sole Proprietor?

A limited liability company is a common business structure which combines the limited liability of a corporation with ...

How to Set Up an LLC to Buy an Apartment to Rent out

A limited liability company, or LLC, is one type of business structure available to your rental business. Although you ...

Browse by category
Ready to Begin? GET STARTED