The advantages of a business trust far exceed the benefits of a corporation.
ADVANTAGE No. 1. Because the corporation is created by the state as a privilege, corporate benefits may be diminished, limited or eliminated by the state government, whereas business trusts, or unincorporated business organizations (UBO) existence and operation are controlled by its contract, not by state corporation law.
ADVANTAGE No. 2. The state charges incorporation fees and ongoing annual fees. The UBO, as a privately created entity, does not have these expenses.
ADVANTAGE No. 3. A corporation (expect for a Subchapter S corporation that is taxed as a partnership) can be subject to double taxation (income taxes on corporate profits (unless zeroed out), then income taxes on dividends paid now or in the future from those profits to shareholders). In contrast, a UBO does not pay income taxes on its profits if it must distribute all of its net income to its beneficiaries - thereby escaping taxation as a simple trust.
ADVANTAGE No. 4. Likewise, capital gains taxes may be entirely avoided by a UBO that sells assets at a profit if the trust contract specifies that all net trust income is to be distributed annually to the certificate holders (beneficiaries) who will be the ones to report the capital gains as taxable income and pay any due taxes.
ADVANTAGE No. 5. Corporate officers and directors (and sometimes shareholder names) and financial dealings are a matter of public record and detailed annual reports. UBO affairs are private and not a matter of public record.
ADVANTAGE No. 6. The avoidance of probate administration is one major advantage of a UBO. If ones assets are all owned by one or more trusts, at ones death, there are no assets in the deceased persons name to go through probate. The trustees and successor beneficiaries continue the uninterrupted administration and benefit of the trust assets and income.
ADVANTAGE No. 7. Because the UBO assets do not go through probate, a UBO cannot be challenged by persons falsely claiming to be heirs or creditors of the deceased person.
ADVANTAGE No. 8. Assets can often be protected against creditors while beneficiaries are alive because the UBO holds legal title to the trust assets with the result that beneficiaries cannot have their shares of capital units attached by creditors if the trust has valid spendthrift clauses.
ADVANTAGE No. 9. Like the initial funding of a new corporation, there is no income or transfer (gift) tax to put initial assets into a business trust (structured to be like a corporation in the initial funding process) because the transferor of the assets receives back a proportionate share of the Certificates of capital Units.
ADVANTAGE No. 10. Whereas corporate stock owned by a stockholder is liable for death taxes (to the extent the value exceeds exemptions and deductions), the assets to a properly structured, funded and administered asset preservation trust will not be part of the grantor who originally funded the trust when the trustor/grantor dies.
