A business trust as a legal entity

Trusts have been used for many years to protect the assets of its beneficiaries, but it can also be used as a format under which to conduct business. Structured correctly, it can be the most practical and appropriate legal entity for your venture.

Choosing to set up your business within the legal framework of a business trust affords certain protections and advantages that other legal entities do not. We look at these very briefly in this article, so it's important to speak to a trust attorney about your specific needs.

A business trust is defined as a trust where the trustee uses the trust assets to do business for profit in order to benefit the trust beneficiary or to further the aims of the trust. A trust may have no more than 20 trustees.

A business trust has the following advantages:

  • The trust protects your assets against personal creditors, because the assets of the trust belong to the trust alone. This means that creditors can not claim against your personal assets
  • The admin costs of a business trust are less than that of a company or CC. For example, a trust is not legally required to hire an auditor, disclose financial statements, pay annual fees to the Registrar, and so on.
  • Taxes related to trusts are less complicated with regards to Income Tax, Capital Gains and the various documents that have to be submitted to SARS, for example.
  • It is cheaper and easer to dissolve a business trust than a company.

Before you decide to opt for a business trust as the format for your enterprise, it's important to speak to an attorney who can explain all the pros and cons in detail. This person can also then draw up the legal documents in your best interest.

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