DST is a legal trust that the Delaware General Corporation Law first formed. DST provides an alternative to corporate ownership, especially for smaller business entities and startups. A company can be structured as either corporation or LLC with stock shares, but each has different advantages over the other, which are explained below:
The main advantage of incorporating under this form would have shareholders who don’t partake in day-to-day operations without making them liable for any debts. Should you choose not to include your liability protection.
Hence, they are only accountable if they participate in daily activities involving managing assets or signing contracts that will result in liabilities on behalf of the company.
Operating as an LLC allows for more flexibility, and the company only needs to perform administrative tasks such as holding board meetings, electing officers or managers.
The US tax code does not consider trusts as taxable entities, so they will never have any federal tax liability if one has no income. However, that doesn’t mean there aren’t things that can’t be done with a trust fund that could trigger taxation.
This will include taking out loans or giving away money/assets from it (and anything else) above what was initially given into the trust. The reason is that the person would be considered the owner of those assets for tax purposes.
There are certain types of trusts that can make income. However, if one wants to avoid paying federal taxes, they would have to complete a specific process called subpart f.
Elections allow them to pay themselves through distributions instead of taking their percentage share as profit because then they will incur taxation at whatever rate the trust falls under (or even worse, if you’re an individual making more than 100k).
The US does not consider DST taxable entities, so any dividends distributed from Delaware statutory trust companies such as Amazon and Google do not appear as taxable earnings in financial statements.
Still, there are no avoiding capital gains taxes when selling shares/stocks cryptocurrency. For example, unless you hold it in the trust long enough to be considered a ten-year property for capital gains tax purposes.
DSTs can also avoid double taxation, which occurs when profits earned through business transactions get taxed at both corporate rates (typically 35%). Then again, on individual income, if one decides to take out money personally but under this structure, they still pay state taxes. Corporations only work on a personal level and not both.
The main issue with DST is that they cannot hold debt like a corporation can, which means no tax advantages. Still, you don’t have the liability protections of incorporating either unless one has their state be considered “debtor friendly.”
This means, individuals who use this form cannot sue someone for more than what’s in the trust fund, so if one does owe money, it will likely come directly out of their assets or bank account.
This form of business structure also gives shareholders, investors, and partners more say in their assets. They are not obligated to sign contracts or participate in daily operations because their name is on documents.
However, that doesn’t mean you have complete control over every aspect of the trust if one does happen to sue for whatever reason since there is no avoiding litigation unless you dissolve it completely.
This structure also protects individuals from being sued for more than what they have in their trust fund. Meaning, you don’t have to worry about losing everything if you happen to be sued for something.
Though, that doesn’t mean you’re immune to lawsuits either because this form of business ownership offers no protections against litigation or other legal proceedings.
The main advantage would be not having double taxation when selling profits earned through business transactions. It’s because corporations are only taxed once instead of paying taxes at both corporate levels.
Then again, as individual income(or worse), unless one holds enough shares/stocks cryptocurrency before putting them up for sale long enough, ten years makes them eligible for lower capital gains tax rates.
In conclusion, a DST can hold all of your assets without paying taxes on them unless you sell those assets, which are taxed at an extremely low rate compared to other forms of business structures.