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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Legal
Satisfied Customers: 116795
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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My husband and myself just formed a family trust to hold our

Customer Question

My husband and myself just formed a family trust to hold our assets for estate planning purposes. Situation is: we have a sole proprietorship small business but want family trust to own it outright now. Thinking of forming an LLC (state of Texas), but have been advised it would have to be a partnership with another entity, even if other entity is only 1% member. So in essence Family Trust would own 99%, other entity 1%. Question: do you know if LLCs and be 100% owned by a family trust? Someone suggested maybe make the LLC a "corporation" -- perhaps then the family trust could be a 100% shareholding member? Can you advise
Submitted: 4 years ago.
Category: Legal
Expert:  Law Educator, Esq. replied 4 years ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking.

Under Texas law an LLC can be owned by a trust as a sole member and I do not know who told you that or why.

Is the trust going to be an irrevocable trust or a revocable trust.
Customer: replied 4 years ago.

The trust is a Revocable Trust. If the trust is the sole member, then does the LLC issue it a 100% K-1 partnership form for IRS purposes?

Expert:  Law Educator, Esq. replied 4 years ago.
Thank you for your additional information.

As long as you realize that the revocable trust does not protect your assets from any creditors. This means that any asset that is in the revocable trust your creditors can seize and this is why they are telling you that you want to have a co-owner of the LLC to prevent a creditor from seizing your business as well. In a irrevocable trust this is not an issue, because assets in the irrevocable trust cannot be touched by any creditors. Keep that in mind and if you are seeking to protect assets from creditors then the revocable trust is not what you want.

If the sole owner of the LLC is the trust, the LLC issues the K-1 to the trust for any profits and losses just like the LLC would issue any other member a K-1. Under the law the Trust is considered a separate person (legal entity) just like the LLC is considered a separate legal entity.

You may want to spend some time and a few dollars sitting with a local trust attorney and discussing using the irrevocable trust if you are trying to protect assets.

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