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Can an LLC be a trustee in a trust?

Redding, CA |
Filed under: Starting an LLC

I will be working alongside a new cleantech company. I will get paid a commission on the sale of equipment. I was told it is possible to have my commissions paid into a trust. I can withdraw from that trust and be taxed on the amounts withdrawn. I am considering forming an LLC instead, as a liability protection vehicle and also because I may want to bring other professionals into my company and pay them a portion of the commissions received from the sale of equipment.

Attorney Answers 3

  1. Yes. Your LLC can be hired as a consultant or a sales compnay. If you do the work, you can have the LLC pay you. If you hire other consultants to do the work the LLC can pay them.

    The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the State of California. Responses are based solely on California law unless stated otherwise.

  2. Yes, but it sounds as if you expect to be able to defer income by causing payments to go to the trust or the LLC. You can’t. IRS will apply the doctrine of “constructive receipt” to tax the income to you in the year earned regardless of the intermediary payee. Since you have the power to withdraw the funds whenever you want to, you are deemed to have “constructively received” the funds and will be taxed on them regardless of whether you with draw them. Also an LLC is a pass-through vehicle so you will have to pay tax on that theory as well. Deferred compensation arrangements such as a “Rabbi trust” are available, but complex. If you want to defer, consult a tax lawyer about how to set up such an arrangement.
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    (Bryant) Keith Martin

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  3. You can establish a trust (to avoid probate, provide disability protection, ensure smooth transition at your death, etc.), then establish an LLC for your professional work and assign ownership of the LLC to your trust for the same reasons. The LLC will provide asset protection not available with the trust alone (and if it is a multi-member LLC the protection may be even greater).

    There are some limitations on the ability to "sell" good will if you sell interests in your LLC to other professionals, so be sure you get sound tax, asset protection and estate planning advice before you proceed. If you go to the AAEPA website, you will be able to locate professionals in your area able to assist with this planning.

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