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Key Features of a UBOT
Organizational Structure: It allows individuals to pool their resources to run a business profitably while shielding themselves from the liabilities associated with partnerships and avoiding the double taxation that corporations face.
Privacy and Asset Protection: A UBOT can help maintain privacy and protect assets from judgments and lawsuits.
Common-Law Basis: Often referred to as a "Common-law Trust," this term highlights that such trusts are established under common law contracts rather than relying on statutory provisions. This is supported by the U.S. Constitution, Article 1, Section 10, Clause 1.
Foundational Documents: The trust is created through two main documents: a Declaration of Trust and a Trust Indenture, which outline the roles, responsibilities, and provisions governing the trust's operations.
Tax Benefits: A UBOT can defer tax obligations on business income or assets until they are distributed to beneficiaries.
Advantages of a UBOT
Enhanced Privacy: Keeps business operations and ownership details confidential.
Limited Liability: Protects trustees and beneficiaries from personal liability related to business debts.
Avoids Probate: Assets in the trust do not go through probate, facilitating smoother transitions.
Exemption from State or Inheritance Taxes: Typically not subject to these taxes, offering financial advantages.
Tax Minimization: Allows for strategies to minimize or eliminate income taxes until distributions occur.
Depreciation Benefits: Maximizes depreciation on business assets, reducing taxable income.
Capital Gains Tax Reduction: Can help mitigate capital gains taxes upon asset sale.
Investment Separation: Enables distinct investment programs within the trust structure.
Asset Protection: Safeguards assets from creditors, enhancing overall financial security.
This structure provides a flexible and beneficial way to manage business operations while offering significant legal and financial protections.
