What is the difference between a trust and an LLC?

Trusts are primarily used to avoid taxation when transferring family assets from generation to the next. LLCs are legal business entities, similar to simplified corporations, that have as their main feature the ability to shield owners of the business from legal liability for actions of the business.

Is a trust a business entity?

A trust is not a business entity, as an LLC is, however, and creating one doesn’t require filing any documents with a government agency. Trusts can hold many different types of assets, including cash and bank accounts, real estate and securities, as well as ownership interests in an LLC or other business entity.

What types of trusts are used for LLC asset transfers?

The three main types of trusts that are commonly used with LLC asset transfers are revocable trusts, irrevocable trusts, and asset protection trusts. Each type has pros and cons for holding LLC assets.

Can I put my LLC interests in a trust?

Placing your LLC interests in a trust means that the trust—not you as the business owner—is legally an LLC member and a party to the LLC’s operating agreement. Although the law permits a trust to own an LLC, the LLC operating agreement may not. Therefore, you will first need to check whether the operating agreement allows for this arrangement.