You and your partner are planning to go into business together in Minnesota, but you both are clear that you want to limit your personal liability as much as possible. While you may be thinking about forming a limited liability company, you may also want to consider organizing an association under a declaration of trust.
The Minnesota statutes explain that a declaration of trust, also called a business trust, is an instrument that you file in Minnesota’s Office of the Secretary of State. Once your association is a business trust, it cannot be an agency, joint stock company or partnership. The association could be formed by two corporations, as well, but regardless, the trust itself is an unincorporated association that is a separate entity.
You name an agent or trustee who conducts the business of the association, as well as beneficiaries. You and the person you are going into business with can be both trustees and beneficiaries. You may set an end date for your business trust, but if you do not specify a time limit, then the business trust will continue perpetually.
The beneficiaries, trustees and shareholders are exempt from any personal liability, but the association itself can be plaintiff or defendant in litigation. Your business is not limited to Minnesota and can be conducted elsewhere. The trust can acquire real estate and personal property, and deeds, loans and contracts are in the association’s possession. The trust can also sell or lease property, or contract for, mortgage, encumber or transfer it.
This information about business trusts in Minnesota is general in nature. It should not be construed as legal advice, or replace the counsel of an attorney.