Unincorporated Business Organization Trust
What is an Unincorporated Business Trust?
UBOT is:
1) an organization created and managed by ”trustees” for the benefit and profit
of Beneficiaries who hold or may acquire transferable trust certificates. Trust
certificates provide individual holders evidence of interest in the Trust estate
(assets/income).
2) a powerful entity by which individuals may combine their resources to operate
a business for profit without the inherent liabilities of a partnership or the
double taxation of corporations. A UBOT. can preserve privacy; protect
assets against judgments and lawsuits.
3) often called a “Common-law Trust” but this phrase is not descriptive of any of
the peculiar characteristics of such organizations. The basis for the
terminology “Common-law Trust” is that they are created under the common
law of contracts and does not depend upon any statute for its existence. See
the United States Constitution, Article 1 Sec. 10, Clause 1.
4) brought into being by two basic documents: a Declaration of Trust and a Trust
Indenture. These two documents make all the provisions of who is who and
who is responsible for what, relative to the Trust activities.
5) A great way to avoid tax liabilities of a business, or trust transactions, until
money or assets are distributed to the beneficiaries.
Since the Trust Indenture is a contract between the creator and the trustee, the
indenture controls the activities, powers and responsibilities of those who administer the
Trust. No one has legal authority to change its provisions except those so authorized by
the indenture.
The benefits of a UBOT are:
1) Privacy
2) Limited liability
3) Not subject to probate
4) No state or inheritance taxes
5) Minimize and/or avoid income taxes
6) Maximize depreciation
7) Reduce capital gains tax
8) Separate investment program
9) Protect Assets against Creditors
Elliot vs. Freeman, 220 US 178, A Pure Trust is not subject to legislative control. The United States Supreme Court holds that the Trust relationship comes under the realm of equity, based upon the common law, and is not subject to legislative restrictions as are corporations and other organizations created by legislative authority.