Can a Trust Own an LLC in Florida?

Yes, a trust can own an LLC. This arrangement is often used to enhance asset protection for the trust, better manage estate planning, and streamline the transfer of assets.

When a trust owns an LLC, the LLC (and everything it owns) becomes part of the trust estate.

How It Works

When a trust owns an LLC, the trust becomes a member of the LLC and owns the membership interest.

The trustee can either manage the LLC directly or hire an LLC manager.

Having the trust own an LLC is a good idea to protect the trust from liability stemming from trust property.

One common setup is for a trust to own an LLC, which itself then owns real property. Should any liability arise from the property, the trust itself would not generally be liable. In this way, other trust assets outside of the LLC structure would be insulated from claims originating from the LLC’s assets.

Benefits of Trust-Owned LLCs

1. Asset Protection: A trust-owned LLC can shield the trust from liability stemming from assets in the LLC.
2. Estate Planning: Integrating an LLC allows the LLC owner to direct the inheritance of their LLC after death without having to go through probate.
3. Privacy: The trust can offer anonymity for the LLC’s owner, as the public records of the LLC list the trust and trustee, not the trust grantor or beneficiary.

Setting Up a Trust-Owned LLC in Florida

In Florida, setting up a trust-owned LLC is a simple two-step process. First, you must create the trust. Then, you assign your membership interests in the LLC to the trust.

Why Transfer an LLC to a Trust?

Transferring ownership of an LLC to a trust can serve several purposes. For estate planning, it allows the LLC interest to pass to beneficiaries without going through probate. In asset protection planning, holding the LLC inside an irrevocable trust may shield the interest from future creditors, depending on the trust structure and applicable laws. When a revocable trust owns an LLC, the grantor maintains full control but gains the benefit of streamlined administration after death or incapacity.

The transfer process typically involves assigning the LLC membership interest to the trustee of the trust. The LLC’s operating agreement should be reviewed to ensure it does not prohibit or restrict such a transfer. In Florida, there are no special filings required with the state when assigning an LLC interest to a trust, but the company’s records should reflect the change in ownership.

Tax Treatment of a Trust-Owned LLC

When a revocable trust owns a single-member LLC, the IRS treats the LLC as a disregarded entity. This means the grantor reports the LLC’s income and expenses on their personal return, just as if they owned the LLC directly. If the LLC has multiple members or the trust is irrevocable, the tax implications can differ and may require filing a separate tax return for the LLC or the trust.

LLCs owned by irrevocable trusts can provide tax planning opportunities but may also trigger more complex filing obligations. It’s important to coordinate LLC ownership with both estate and tax planning goals. Business owners in Florida often use revocable living trusts to hold LLC interests as part of a simple, effective estate plan that avoids probate without affecting day-to-day operations.