Series 22: 1.1.7.1. Business Trusts

1.1.7.1.  Business Trusts

A commercial or business trust operates in exactly the same way as a private trust, except that it expects to make a profit for the trustor. A company creates the trust by transferring financial assets to the trust in return for trust certificates. The trust raises funds by selling the trust certificates to investors. The investors buy the certificates, hoping the trust assets will increase in value sufficient to repay the investment plus the rate of return specified on the certificate.

With a business trust, the company is the trustor. The company appoints an individual to be the trustee with legal title to the trust property. The trustee will administer the trust as a fiduciary, based on the terms in the trust agreement (declaration of trust). The investors are the beneficiaries, whos