Trust vs Corporation

[Travis Retriever]

What's the difference between a Trust and a Corporation?

[MrBogosity]

A trust is a company where the shareholders have agreed to, in lieu of taking votes themselves, have decisions for the company made by a Board of Trustees, in exchange for receiving dividends. A trust may or may not be a corporation (although nowadays almost certainly will be).

Now, if you're wondering why it's that arrangement and not government incorporation that restricts trade, reduces competition, and creates monopolies, you're not alone.

[Travis Retriever]

OK, so it sounds like they're similar.
My impression was that a Trust was a Corporation only without the government privileges.

[MrBogosity]

Sort of, yes. The idea is to make a large company easier to manage.

[Virgil0211]

A trust is a company where the shareholders have agreed to, in lieu of taking votes themselves, have decisions for the company made by a Board of Trustees, in exchange for receiving dividends. A trust may or may not be a corporation (although nowadays almost certainly will be).

Now, if you're wondering why it's that arrangement and not government incorporation that restricts trade, reduces competition, and creates monopolies, you're not alone.

Dammit, man! I just had a test over this in my business legal environment class! I wanted to take this one! T_T

Oh, well. I guess I'll go sulk over there.

All else aside, it's been a very interesting class. It helped me to better understand the details of a corporation and other such businesses. We may actually see Corporations phased out in favor of LLCs someday. I mean, they combine the limited liability of corporations without the double taxation. Not that the limited liability concept is a very good one in my opinion, but it's still a fascinating subject. =P

[Travis Retriever]

Good grief, and I just had some idiot tell me that what it means to incorporate (forming a corporation) means to combine into a larger thing. *facepalms*
Hasn't the idiot telling me that ever heard of people becoming corporations?  I know Penn is one.

[Tdarcos]

Dammit, man! I just had a test over this in my business legal environment class! I wanted to take this one! T_T

Oh, well. I guess I'll go sulk over there.

All else aside, it's been a very interesting class. It helped me to better understand the details of a corporation and other such businesses. We may actually see Corporations phased out in favor of LLCs someday.

There are some situations where a corporation is a better tool than an LLC, and as such they won't disappear. You can't run a public company as an LLC, because an LLC can't sell shares. Also, a single-member LLC is treated as a disregarded entity for tax purposes so income or profits are treated as if they are from self-employment and you use schedule C. This means that you have the same limits on deductions, and the "partial home use" rule applies, you can only deduct the expenses for that part of your home that is exclusive to the business. An S corporation has the same rule. But a single-stockholder or combined single director and officer C corporation can pay the entire cost of rent or lease payments whether it uses all or part of the facility.

But the S corporation is effectively dead, the LLC provides more advantages including that members of an LLC can be non-US citizens while with an S they cannot.

I mean, they combine the limited liability of corporations without the double taxation. Not that the limited liability concept is a very good one in my opinion, but it's still a fascinating subject. =P

There's only double taxation if you're going to have distributions above salary. If you're going to pay yourself a salary (in order to be eligible for Social Security) and there's nothing left, then it doesn't matter whether you use a corporation or an LLC, there won't be anything extra to tax. Also there can be lesser fees. In Maryland, a stock corporation or LLC pays $300 a year to renew its charter. Non-Stock - and a for profit can be non-stock, that's what a mutual insurance company is - pays $0 in renewal fees.