What is the Difference Between Trust and Company?

The main difference between a trust and a company is that a trust is not a separate legal entity, while a company is a separate legal entity. Here are some key differences between trusts and companies:

Trust:

• Used for private, personal purposes, such as asset protection and minimizing taxes.
• Income can be distributed with the lowest marginal tax rates.
• Trust's beneficiaries pay tax on income they receive at their own marginal rate.
• Trustee can distribute income at their discretion.
• Provides more privacy than a company.
• Beneficiaries do not own the trust assets.

Company:

• Set up for business and for-profit purposes.
• Provides better asset protection, greater working capital, and investment opportunities, as well as a longer life span.
• Shareholders can control the company and vote the directors out.
• Has very strict reporting requirements and can be tedious for the members.
• Operating a business under a company structure can generate more working capital, especially since trusts are taxed at higher rates when profits are generated.

When deciding whether to run a business as a trust or a company, it is essential to consider factors such as asset protection, tax obligations, and the desired level of privacy. The choice between a trust and a company will depend on the individual's specific circumstances and goals.

Comparative Table: Trust vs Company

Here is a table highlighting the key differences between a trust and a company:

Both trusts and companies have their advantages and disadvantages, and the choice between them depends on individual circumstances and goals. Trusts provide asset protection, flexibility in income distribution, and privacy, while companies offer a separate legal entity, flexibility in shareholding, and the ability to enter into contracts and own assets in their own right.