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Can a trust own your LLC?

  • Writer: Brandi Joffrion
    Brandi Joffrion
  • Jun 1, 2024
  • 2 min read

Generally yes, but three things have to line up, and people usually only handle one of them.


1: Your operating agreement has to allow it

Many operating agreements restrict transfers of membership interests. Some require consent from other members. Some prohibit transfers to entities entirely. If yours does and you transfer anyway, the transfer may be ineffective or may trigger consequences you didn't intend.

Read the transfer provisions before you move anything.


2: The transfer has to actually happen

Saying the trust owns the LLC doesn't make it so. There's normally an assignment of membership interest, signed, with the company's records updated to reflect the trust as the member.

This is the step people skip. They fund the trust with the house and the brokerage account, and the LLC interest — often the largest asset — never gets assigned. The trust then doesn't control it.


3: Everything downstream has to agree

Your state filing may list members. Your bank has documents on file. If you have beneficial ownership reporting obligations, the trust's involvement may affect them.

When the trust owns the company but every other document still shows you personally, you've created exactly the kind of contradiction that stops bank applications and slows closings.


What it does and doesn't accomplish

A trust owning your LLC interest generally keeps that interest out of probate, which is the usual reason people do it.

It doesn't, by itself, change your tax treatment, protect the interest from your own creditors, or fix an operating agreement that doesn't work.


A note for business owners

If you own a business and have an estate plan, those two documents need to agree with each other. An operating agreement that restricts transfers on death and a trust that directs the interest elsewhere is a contradiction that surfaces at the worst possible time.


Whichever professional handles your estate plan should see your operating agreement. Ask them.


This is general information, not legal advice for your situation. If you want an answer for your business, book a consultation.

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