Sec. 2.1. Attributes
In various incarnations, the statutory business trust is older than each of the other unincorporated business entities except for general partnerships. In its modern incarnation, the statutory business trust has most of the attributes of the other unincorporated business entities. However, it does have certain corporate attributes.
A. Structural Attributes
1. Legal Person.
The statutory business trust is legal person which is separate and distinct from its constituents. n its own name, the statutory business trust can hold property, enter into contracts and sue/be sued.
2. Settlor.
The settlor is the individual or business entity who or which holds title to assets and transfers that title to the dominion and control of the statutory business trust to be used for the purposes for which the statutory business was created. The settlor can be the same person as the trustee and beneficiary.
3. Beneficiary.
There must be at least one beneficiary. A beneficiary can be an individual or another business entity. The beneficiary can be the same person as the settlor and the beneficiary.
4. Beneficial Interest.
A beneficial interest is personal property and freely transferable.
5. Trustee.
There must be at least one trustee. A trustee can be an individual or another business entity. The trustee can be the same person as the settlor and the beneficiary.
6. Corpus or Principal.
The corpus or principal is composed of the assets, the title to which the settlor transfers to the dominion and control of the statutory business trust.
The doctrine of limited liability protects the personal assets of trustees and beneficiaries. The corporation formulation rather than the unincorporated formulation applies.
8. Series.
The business trust can create and maintain series of beneficial interests.
9. Taxation.
The statutory business trust is classified as an association and taxed as a passthrough entity by default. It can choose to be taxed as a corporation under the same terms as can any other unincorporated business entity.
10. Management.
The statutory business trust is not required by law to elect a board of directors nor appoint officers. Management powers and authorities can vest in the trustee or be allocated between or among the trustee, the beneficiary or the protector, (if any).
Traditionally, the principals of a trust chose whether the trust would be irrevocable or revocable. In an irrevocable trust, the grantor lacks the power as a matter of law to change any of the terms of the trust, the trustee or any beneficiary. Irrevocable trusts are used only for certain purposes such as limiting estate taxes, obtaining government benefits or protecting assets from creditors. In a revocable trust, the grantor may change any term, trustee or beneficiary subject only to the terms of the trust instrument. Statutory business trusts are almost never created as
irrevocable trusts.
B. Regulatory Attributes
1. Enabling Statutes.
A statutory business trust can be organized and validly formed only if it complies with the formation requirements which are set forth in a statutory business trust statute. Most of the regulatory items in the statutory business trust statutes are default although there are some mandatory provisions.
The management and operations of the statutory business trust are governed by a trust instrument which is concluded between or among the settlor, trustee and beneficiary. The trust instrument sets forth the terms and conditions of the contractual relationship.
3. No Formalities.
The statutory business trust is not required by law to create and maintain any specified documentation similar to corporate formalities.
The trustee is a fiduciary and subject to the fiduciary duties set forth in law.
The statutory business trust is subject to the CTA but a common law commercial trust is not.