Massachusetts business trust: Overview, definition, and example
What is Massachusetts business trust?
A Massachusetts business trust (also known as a statutory trust or common-law trust) is a legal structure where a business is managed by trustees on behalf of beneficiaries or shareholders. It originated in Massachusetts but is now used in other states as well. The trust holds and operates a business, and trustees run it according to the terms of a written trust agreement.
In simple terms, it’s a way to run a business like a corporation or partnership, but through a trust arrangement instead of a standard business entity.
Why is Massachusetts business trust important?
This structure is often used in investment funds, real estate ventures, and asset management businesses because it offers:
- Limited liability to shareholders
- Flexible management by trustees
- Pass-through taxation, depending on how it’s set up
- A clear separation of legal ownership and control
It can be especially useful when the business’s main goal is to hold and manage assets for the benefit of others. However, it’s not ideal for all types of companies, and it requires careful setup with a strong trust agreement.
Understanding Massachusetts business trust through an example
Let’s say a group of investors wants to pool money to purchase and manage a portfolio of apartment buildings. Instead of forming a corporation or LLC, they create a Massachusetts business trust. The trust holds legal title to the real estate, and a board of trustees is appointed to manage the operations.
The investors are the beneficiaries of the trust—they don’t manage the buildings themselves, but they receive income and reports based on the trust’s performance. This structure gives them limited liability and simplifies how the assets are held and transferred.
An example of a Massachusetts business trust clause
Here’s how a reference to a Massachusetts business trust might appear in a legal agreement:
“The Trust is organized as a Massachusetts business trust under a Declaration of Trust, and neither the Trustees nor the shareholders shall be personally liable for any debt, claim, demand, judgment, or obligation incurred by the Trust.”
Conclusion
A Massachusetts business trust is a unique but powerful legal structure for managing assets or investment ventures. It offers flexibility, liability protection, and a formal structure without some of the complexities of traditional corporations.
If you’re involved in real estate, fund management, or asset-heavy businesses, this structure might be worth exploring—but be sure to get legal advice to set it up properly and comply with state rules.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.