A trading trust is a particular type of structure that is usually established by individuals or businesses. It is established to carry on a business, and contains similar features to a traditional trust, such as a deed, trustees and beneficiaries. The main purpose for its creation is for asset management, as it enables the transfer of assets.
Trading Trust explained
A trading trust is established to carry on a business and may be used as an alternative to other business structures, such as the traditional Limited Liability Company. When a trading trust is established, it features a trust deed, which is a document that outlines all of the conditions and stipulations of the entity. This includes the appointed beneficiaries, who are the individuals benefiting from the formation of the structure. It also outlines how the beneficiaries will benefit and how assets will be distributed.
The deed also outlines the responsibilities of the trustee, who is the individual or corporate entity responsible for managing and administering the entity. The settlor is the individual who establishes the trading trust, and who initially chose to set up the structure.
In some circumstances, the trustee is a limited liability company which has powers to carry on business. In this respect, the trust has trading functions and employees to manage its business.
Typically speaking, third parties are not aware of the existence of a structure, as all documentation used is the name of the Trustee Company. This increases the privacy and confidentiality of the entity. The formation of this particular entity offers numerous tax advantages, for example, upon the distribution of assets to beneficiaries, no taxes will be charged.
The structure of trading entities differs from one country to the next and it is therefore fundamental for anyone who wishes to create a trading trust, to research the specific features provided by each jurisdiction.