Difference Between Trust and Company

There are different types of organizations that conduct different businesses with a specific purpose. Proprietary business, partnership, a corporate business, a trust, or cooperatives are the example of a company. Every organization has to fulfill certain responsibilities in order to run their business successfully. A company and a trust are two different kinds of organizations that have a specific set of attributes. They are formed for different purposes, and have different characteristics in terms of their control, set-up and assets.

Trust

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

Company

A company, on the other hand, 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 company business doesn’t include a partnership business or other incorporated group of persons.

Ownership of Assets

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.

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

Control

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. Even in case of a revocable trust where the terms of the trust deed can be changed and assets are titled to a trust, it still cannot control the assets, and the control lies with the grantor of a trust. Moreover, if trust is dissolved by a grantor, a trust loses the right to manage the assets.

In case of irrevocable trust where the terms of a deed cannot be changed, grantor loses the control of assets, but the trust still cannot have full control over the assets, because it must act with care and loyalty on behalf of beneficiaries as its fiduciary duty. Therefore, it retains only limited control of assets.

Purpose

Companies are usually incorporated by those individuals who understand the basics of business, the relationship between shareholders, company ownership, voting rights and profit potentials. The sole purpose of companies is to manage the business operations and increase the profit, and a portion of these profits is reinvested into the business for its development. Therefore, you can say that the proceeds of a company become the spending of a company with the motive to take it to the next level.

A trust is formed with the aim of providing protection to assets and other properties of a grantor. The responsibilities of a trust include record keeping, management of investment or account, pay medical expenses, bills, and charitable gifts, etc.

The grantor chooses a trust on the basis of how the services of the trust are related to trust assets, for example, an investment management firm can become a trustee for grantor’s shares, retirement accounts, or bonds. And a bank can act as a trustee for checking account, certificate of deposit accounts, and savings account that a grantor has. Therefore, trusts have employees who are expert in a particular asset management.

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