Quick Summary

This article explains how trusts can own LLCs, offering benefits like asset protection and, privacy, and estate tax savings. It outlines the steps to transfer an LLC into a trust, including legal considerations and how to choose the right trust type. Visit the Blake Harris Law Blog to learn more about protecting your assets.

Wondering if Placing an LLC into a Trust is a Smart Strategy?

A limited liability company (LLC) can provide asset protection, but is it enough on its own? Many business owners and investors use trusts to enhance security, safeguard wealth, and ensure long-term control over their assets. But can a trust actually own an LLC, and if so, how does that impact asset protection?

In this Blake Harris Law article, we are going to explain how trusts can own LLCs, the benefits of this structure, and key considerations to keep your assets safe.

But first…

Why Listen to Us? 

At Blake Harris Law, we specialize in offshore asset protection with a proven track record of client success. Our dedicated team, led by managing attorney Blake Harris, brings years of legal expertise and a global network to ensure your assets are protected. Trust our experience to guide you through the complexities of LLCs and trusts.

What Is an LLC?

A Limited Liability Company (LLC) is a popular business structure that combines the flexibility of a partnership with the liability protection of a corporation. It is designed to protect its owners, known as members, from personal liability for business debts and legal obligations. 

This means that in most cases, your personal assets; such as your home or savings, are shielded from business-related lawsuits or creditors.

We’ have covered everything you need to know about LLC asset protection in this article.

What Is a Trust?

A trust is a legal arrangement in which a trustee holds and manages assets on behalf of beneficiaries. The person who creates the trust, known as the grantor, transfers ownership of assets; such as property, investments, or even LLCs, into the trust. 

The trustee is responsible for managing these assets according to the terms outlined in the trust agreement, ensuring that the beneficiaries receive the benefits.

Can a Trust Own an LLC?

Yes, a trust can legally own an LLC. This structure is often used for asset protection and estate planning purposes. When a trust owns an LLC, the trust holds the membership interest, giving it control over the LLC’s assets and operations. 

This allows the trust to provide an additional layer of protection for the LLC’s holdings, such as real estate, investments, or even cryptocurrency, ensuring they are safeguarded from potential threats like lawsuits or creditors.

At Blake Harris Law, we specialize in asset protection strategies, including the use of trusts to own LLCs.

How It Works

When a trust owns an LLC, the ownership interest is typically held by the trust as a separate legal entity. The trust, through its trustee, becomes the member of the LLC. The trustee manages the LLC in accordance with the trust’s terms, while the beneficiaries receive the benefits as outlined in the trust agreement. 

This setup allows for greater flexibility in managing the LLC and provides protection for both the business assets and personal wealth of the grantor.

For example, in the case of an irrevocable trust, the trust owns the LLC and the trustee controls the LLC’s operations. The grantor may still benefit from the LLC’s income, but the trust itself retains ownership, keeping the assets out of the reach of personal creditors. This structure can be used to pass assets to heirs while minimizing estate taxes and avoiding the probate process.

Key Legal Considerations

There are several important legal considerations when setting up a trust to own an LLC. These include:

  • State Laws: Laws vary by state, so it’s essential to understand the legal requirements for LLC ownership in the relevant jurisdiction.
  • Operating Agreement: The LLC’s operating agreement should be amended to reflect the trust as the owner. 
  • Trustee Responsibilities: The trustee has a fiduciary duty to manage the LLC in the best interests of the beneficiaries. This includes overseeing the LLC’s operations, ensuring compliance with legal requirements, and acting in line with the trust’s terms. 

Benefits of Having a Trust Own an LLC

  • Asset Protection: A trust adds an extra layer of protection by keeping assets (including LLC assets) out of the grantor’s direct ownership, making it more difficult for creditors to access them. At Blake Harris Law, we specialize in creating offshore trust structures that maximize asset protection for clients, ensuring that their wealth remains secure.
  • Probate Avoidance: Assets held in a trust bypass probate, allowing for a smooth and private transfer to beneficiaries.
  • Privacy: Trust ownership keeps business and financial details confidential, preventing public disclosure.
  • Estate Tax Benefits: Proper structuring may help reduce estate taxes, preserving more wealth for heirs.
  • Business Continuity: A trust provides a clear succession plan, ensuring a seamless ownership transition without court interference.

How to Transfer an LLC into a Trust in 6 Steps

Transferring an LLC into a trust involves several legal steps to ensure that ownership, tax implications, and asset protection strategies are properly managed. Here’s is how to do it efficiently:

Step 1: Assess Suitability and Choose the Right Trust Type

Transferring an LLC to a trust is not a one-size-fits-all solution. Before making this move, evaluate your asset protection, tax planning, and estate planning goals. Consider whether a revocable or irrevocable trust is the best fit.

  • Revocable Trusts: Retain control over your LLC but offer limited asset protection.
  • Irrevocable Trusts: Provide stronger protection from creditors and can reduce estate tax liabilities.

At Blake Harris Law, we help clients select the right trust type, ensuring your LLC is protected and aligned with long-term estate goals.

Step 2: Review and Amend the LLC Operating Agreement

Check the LLC’s operating agreement to ensure that ownership transfers are allowed. If there are restrictions, such as requiring member approval, amend the agreement accordingly.

Key Changes:

  • Ownership Structure: Update to reflect the trust as the new owner.
  • Voting Rights: Clarify who has decision-making authority (trustee or beneficiaries).
  • Buy-Sell Provisions: Adjust terms if the trust dissolves or undergoes changes.
    Updating the agreement helps avoid disputes and ensures the trust’s authority is recognized, especially for high-value assets like real estate and cryptocurrency.

Step 3: Draft or Update the Trust Agreement

The trust agreement must be clear about who controls the LLC, how assets are managed, and what happens if the grantor becomes incapacitated or dies.

  • Trustee Designation: Specify the person responsible for managing the LLC.
  • Asset Protection: Add safeguards to protect against lawsuits and creditors.

Using our service will ensure your LLC is transferred into a well-structured trust, enhancing asset protection and privacy.

Step 4: Transfer Membership Interests to the Trust

The next step is to formally transfer LLC ownership to the trust via an Assignment of Membership Interest document.

Key Considerations:

  • State Laws: Ensure compliance with ownership transfer laws.
  • Internal Records: Update LLC meeting minutes or resolutions.
    Once the transfer is complete, the trust becomes the official owner, providing the LLC’s assets with asset protection and estate planning advantages.

Step 5: File Required Amendments with the State

Some states require LLC ownership changes to be recorded. Update your Articles of Organization or file a Statement of Change, if applicable.

  • State-Specific Rules: Some states require disclosure of the trust’s ownership, while others allow privacy.
  • Business Compliance: Make sure any professional licenses or business permits reflect the trust’s ownership.
    Failure to update state filings can lead to legal issues, so ensure this step is not overlooked.

Step 6: Update Financial and Business Records

After the transfer, ensure that all financial institutions, tax agencies, and business partners recognize the trust as the new LLC owner.

Key Updates:

  • Bank Accounts: Notify your bank and provide necessary trust documentation.
  • Tax Records: Update the IRS and state tax agencies.
  • Business Contracts: Revise vendor agreements to reflect the trust’s ownership.
    Failure to update these records can lead to operational disruptions or compliance issues, especially when dealing with LLC-held assets like real estate or cryptocurrency.

Let Us Handle Your LLC Transfer into a Trust

Transferring an LLC into a trust requires careful legal structuring to protect assets, streamline estate planning, and comply with state regulations. A well-executed transfer ensures long-term security for your business and investments while maintaining control and flexibility where needed.

At Blake Harris Law, we assist clients in establishing Cook Islands, Nevis, and Belize trusts to provide strong asset protection and a seamless LLC transfer process. Our team handles trust creation, legal compliance, and ongoing asset management, ensuring your LLC is structured for maximum security and financial efficiency.

Schedule a consultation today to secure your LLC within a trust.