When people ask me should I set up a holding company or a trust

When people ask me should I set up a holding company or a trust, the truth is it's not one or the other. They do different jobs. Let's look at their primary role. A holding company owns and controls businesses or assets. A trust on the other hand holds and manages assets for beneficiaries. When it comes down to ownership, a holding company holds equity in subsidiaries, with a trust, a trustee holds legal title and beneficiaries have equitable title. Let's look at protection. A holding company shields your personal assets from business risk. An irrevocable trust is the only type of trust that gives asset protection. When it comes to contracts, holding companies don't sign contracts directly. Operating LLCs do. A trust doesn't sign contracts but beneficiaries can still hold the trustee accountable. Holding companies earn income from dividends, distributions or management fees. Trust distribute income to beneficiaries based on the trust terms. A holding company is best for business restructuring, asset protection and tax efficiency. A trust is best for estate planning, wealth transfer and in some cases asset protection. A holding company can exist perpetually until dissolved. Most trust have to terminate after a certain amount of years unless structured as a dynasty trust. When it comes to privacy a holding company offers high privacy depending on the state. The trust offers high privacy since assets are privately held. So what the structure looks like is the trust is at the top. Your trust owns your holding company and your holding company in turn owns your operating businesses. But here's the key. The operating businesses should be set up in the state where you are primarily operating.