Trust and Corporation

Trust Corporation

A trust is a firm or an organization that is characterized by its trustees who carry out fiduciary duties, or act as administrators or agents of financial assets of another business or individual.

Corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.

A trust has a responsibility to supervise the management of a grantor or asset.

It represents a combination of assets and individuals with a common goal of earning profits to increase the wealth of shareholders. It is a separate legal entity, and is in the form of corporate registered under the companies act.

A trust is usually formed when a grantor (the creator of the trust) feels that this organization can do a better job of managing an asset than an individual person.

A company can control the assets of other entities, as long as it holds the majority stocks of those companies, and has majority voting rights. Whereas, a trust can only manage the assets in accordance with the trust deed terms.

A trust also has its own tangibles and intangible asset, but instead of having the ownership of additional stocks, it owns the assets that are placed by the grantors in a trust.

A company usually owns the tangible and the intangible assets, such as patents, copyrights, buildings, lands, etc., and can also directly own the stocks of other companies.

It entitles the company to a percentage share in the tangibles and intangible assets as well as the profit of those companies on the basis of the amount of stock owned.

Pros and ConsTrust

Pros Cons

Payment of management fees. (It depends on the trust company how much would it be.)

Avoiding probate. Depending on the nature of the property, the third party administering the trust account may limit the properties to be put under the trust account.

Providing for trustor's family after his death or within his lifetime, and stating exactly how, and when, your descendants receive their inheritance.

If there is a pending case for appointment of administrator, the power of the appointed administrator to execute trust agreement with third parties may be questioned. This may even be considered inconsistent with the petition for

appointment of administrator naming an individual different from the 3rd party intended to administer the trust.

Pros and ConsCorporation

Pros Cons

Limited liability. The shareholders of a corporation are only liable up to the amount of their investments. The corporate entity shields them from any further liability.

Interest of the corporation over the properties to be put under its name is questionable especially if the owner has not given its consent nor has interest over the business of the corporation.

Ownership transfers. It is not especially difficult for a shareholder to sell shares in a corporation, though this is more difficult when the entity is privately-held.

Payment of 30% corporate income taxes or 2% minimum corporate income tax on gross sales

Perpetual life (Technically). Life of a corporation here in the Philippines is for 50 years only, however it is renewable. Ownership of it can pass through many generations of investors.

Tedious registration and filing of required periodic reports with SEC, BIR etc