Unlike a company, a trust is not a separate legal entity. Trusts are often used in connection with running a business for the benefit of others. A trust is a structure where a trustee (an individual or company) carries out the business on behalf of the members (or beneficiaries) of the trust. Family businesses are often set up as a trust so that each family member can be made a beneficiary without having any involvement in how the business is run.
- Reduced liability - especially if corporate trustee.
- Asset protection.
- Flexibility of asset and income distribution.
- Can be expensive and complex to establish and administer.
- Difficult to dissolve, dismantle, or make changes once established particularly where children are involved.
- Any profits retained to reinvest into the business, will incur penalty tax rates.
- Cannot distribute losses, only profits.