As family-owned businesses grow worldwide, so too does the trend of placing them in trusts. In the US, the primary motivator for transferring ownership of a business into a trust is tax reduction.
However, there are other motivators:
- Keep the business “in the family”;
- Consolidate power and control within the family; and
- Add an extra layer of protection between the business and family.
Regardless of the motivator, trusts are becoming the go-to method for ownership. But there are implications family businesses need to be aware of.
The most pressing implication is the shift in the family’s ownership. Most family members will become beneficial owners, and their trustees will assume legal ownership and control. Also, trustees, who may or may not be family members, will have the power to vote in board elections and oversee the company’s operations. These are just a few implications of transferring ownership into a trust.
If your family business is considering transferring the business into trust, there are several questions to consider. You can find these questions in “Trust Ownership of Family Businesses: Planning for the Future.”
Read about transferring ownership into a trust here.
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