Trusts

A trust has significant advantages, particularly when combined with a company. However, trusts are subject to an ancient body of law and can become relatively complex.

Nature of the organisation: the trust is a complex form of business organisation. There are a number of various forms a trust may take.

Governing law: each jurisdiction has a Trustee Act, but much of the law relating to trusts is common law and equity.
Establishment procedure: establishment is not necessarily complex but is technical.
Finance: finance will depend solely on the particular circumstances.
Continuity of existence: the trust does not have an independent existence, so the death of an individual beneficiary or trustee may not be a serious problem. If the trust has no property to administer then there is little need for the trust to continue.
Limitation of liability: a trustee is usually liable for actions taken and debts incurred as trustee. A creditor's right to recover his or her debt from the trust property itself is limited.
Control of the organisation: the trustee has control over the trust but must fulfil his, her or its fiduciary relationship to the beneficiaries.
Beneficiaries have only limited rights to influence the trustee's discretion.
Formalities: a trust generally involves fewer formalities than running a company.
Admitting new investors or participants: this will depend on the trust deed and, to an extent, the trustee's discretion.
Selling the business interest: a trustee has the power to sell any trust assets.
Cessation of business: it is a relatively simple matter to wind up a trust, generally it is more of a practical than a legal question.
Tax implications: a trust offers substantial tax advantages because of its flexibility. The business person can use the trust to split his or her income, but retains broad control over the funds.