Business Trust

Also found in: Financial.

Business Trust

An unincorporated business organization created by a legal document, a declaration of trust, and used in place of a corporation or partnership for the transaction of various kinds of business with limited liability.

The use of a business trust, also called a Massachusetts trust or a common-law trust, originated years ago to circumvent restrictions imposed upon corporate acquisition and development of real estate while achieving the limited liability aspect of a corporation. A business trust differs from a corporation in that it does not receive a charter from the state giving it legal recognition; it derives its status from the voluntary action of the individuals who form it. Its use has been expanded to include the purchase of Securities and commodities.

A business trust is similar to a traditional trust in that its trustees are given legal title to the trust property to administer it for the advantage of its beneficiaries who hold equitable title to it. A written declaration of trust specifying the terms of the trust, its duration, the powers and duties of the trustees, and the interests of the beneficiaries is essential for the creation of a business trust. The beneficiaries receive certificates of beneficial interest as evidence of their interest in the trust, which is freely transferable.

In some states, a business trust is subject to the laws of trusts while, in others, the laws of corporations or partnerships govern its existence. The laws of each state in which a business trust is involved in transactions must be consulted to ensure that the trust is treated as an entity whose members have limited liability. If the laws of a particular state consider a business trust to be a partnership, the beneficiaries may be fully liable for any judgments rendered against it. The trustees of a business trust are liable to third parties who deal with the trust unless there is a contract provision to the contrary, since they hold legal title to the trust property and may sue and be sued in actions involving the trust. They may, however, seek indemnity from the trust property and possibly from the beneficiaries.

The property of a business trust is managed and controlled by trustees who have a fiduciary duty to the beneficiaries to act in their best interests. In many states, the participation of the beneficiaries in the management of the property destroys their limited liability, and the arrangement will usually be treated as a partnership.

Profits and losses resulting from the use and investment of the trust property are shared proportionally by the beneficiaries according to their interests in the trusts.

A business trust is considered a corporation for purposes of federal Income Tax and similarly under various state income tax laws.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
M2 PRESSWIRE-August 1, 2019-: New Chair appointed to the Pacific Business Trust
The committee will evaluate, from a corporate, corporate governance, tax, accounting and business perspective, whether the trust should be converted into a C-corp or, in the alternative, whether the trust should remain a business trust. The conversion exploration committee will begin its work this week.
Advisory services are provided by Macquarie Investment Management Business Trust, a registered investment adviser.
According to I-T law, interest payable by an Indian company or a business trust to a non-resident, including a foreign company, on rupee denominated bond issued outside India before the July 1, 2020, was liable for concessional rate of tax of 5 per cent.
Summary: New Delhi [India], Sep 17 (ANI): The union government on Monday announced that interest payable by an Indian company or a business trust to a non-resident, including a foreign company, in respect to rupee denominated bonds issued outside India before July 1, 2020, would be liable for a concessional tax rate of five per cent.
The new equipment has been provided by significant donation from the Calderdale Business Trust (CBT).
The fund owned USD11.0 million of the USD32.0 million in trust preferred securities that had been issued by Mercantile Bank Capital Trust I, a wholly owned business trust subsidiary of Mercantile.
The former Border Media stations were sold by the Border Media Business Trust, headed by Larry Patrick.
Chobanov explained the growth rate with the better attitude to business, the return of payments to the sector on time, and the improvement in business trust.
Wal-Mart Real Estate Business Trust of Bentonville bought 9.25 acres, which included a house and pasture near the southwest corner of U.S.
IRF said the IPO could take place as soon as the second quarter of 2014, after the company gave up plans for a listing in Singapore of a business trust.
This business community says that building infrastructure is going to help intensify the economic exchange and raise mutual business trust. This, according to the Chamber would be a clear sign of a policy of good neighborliness that takes care of the interests of the citizens and their economic prosperity.

Full browser ?