Can a Trust Own an LLC in New York?

A trust in New York can own multiple real and personal assets, including membership interests in a limited liability company, or “LLC.” This is true for both revocable and irrevocable New York trusts. However, a trust’s capacity to own LLC interests does not mean you should rush to form one to hold your LLC interests or immediately transfer your LLC into an existing one. Instead, it’s wise to evaluate this within the greater context of your overall estate plan with the assistance of an experienced New York trust lawyer at Pierro, Connor & Strauss, LLC. For over 40 years, we have successfully met the legal needs of families and businesses with sophisticated estate and trust planning, estate administration, and litigation services.

How Does a Trust Exercise Voting Rights in the LLC Interests It Owns?

When you transfer the legal and equitable ownership of your LLC interests to a trust, the trustee has the right to exercise the LLC’s voting rights. They can exercise those rights on behalf of the trust and in a manner consistent with the trustee’s fiduciary obligation to manage it in a way that is most beneficial to its beneficiaries. When you transfer LLC interests into a trust, it is critical to review and, if necessary, amend the trust agreement to provide guidance to the trustee. A knowledgeable New York estate planning lawyer is your best resource to complete that task.

Louis W. Pierro

Aaron E. Connor

Peter J. Strauss

What Are the Benefits of Transferring LLC Interests Into a Trust?

Some of the benefits of transferring an LLC into a trust include the following:

Avoiding the delays and complications of the probate process in New York. Even under the best of circumstances, weeks or months can elapse between an initial estate probate filing and the approval of an estate administrator. During that time, the testator’s LLC interests will be in limbo, with no one able to vote or control the greater management of the LLC’s corporate processes.
Protecting LLC assets from creditors. When a trust is properly structured, any claims that creditors might file against a testator’s estate will not reach LLC interests and other assets a trust owns.
Anticipating and planning for potential problems. An LLC that is owned by a person who has in any way become disabled or incapacitated will face challenges that might require a court appointment of an independent guardian. This problem can be prevented when LLC interests are held in a well-designed trust that includes instructions for asset management in the event of the disability or incapacity of the trust’s grantor.

Are There Situations Where a New York Trust Should Not Own an LLC?

LLCs are governed by operating agreements that define whether the LLC is managed by its members or by managers elected by the members who may own or exercise voting control over LLC interests. For a variety of reasons, an operating agreement might preclude trust ownership of LLC interests. If the operating agreement for your LLC includes this type of restriction, your attempt to transfer the ownership of your LLC into a trust will be void or voidable by the LLC’s other owners.

Given this, before you transfer any LLC interests into a trust, a New York trust and estate planning attorney should examine the operating agreement and any other contracts or restrictions among the LLC’s members. They can verify that a trust can legitimately own and exercise control over the LLC interests that you propose to transfer into the trust. In many instances, other members of the LLC should approve a resolution to authorize and affirm the transfer.

New Federal & State Reporting Requirements for Trusts in New York in 2024

In addition to the ordinary state reporting requirements for LLCs, recently passed federal and New York state legislation has added additional reporting requirements for LLCs in New York State. These additional reporting requirements are designed to identify the beneficial owners of LLCs – individuals who, directly or indirectly, exercise substantial control over or own a considerable portion of the company.

Corporate Transparency Act

Starting in 2024, the Corporate Transparency Act requires that LLCs owned in the United States by certain U.S. and foreign entities disclosure certain information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This information includes names, addresses, birth dates, and social security numbers and passport information.

LLCs created before January 1st, 2024 must file their FinCEN report (known as Beneficial Ownership Information, or BOI) before January 1st, 2024. LLCs created during 2024 have 90 days from the date of their creation to file their FinCEN report. LLCs created in 2025 and beyond will have 30 days from the date of their creation to file.

After an initial BOI report is filed, the owners of the LLC must submit an updated BOI report within 30 days following any change in the information previously provided.

The New York LLC Transparency Act

This New York-specific piece of legislation creates similar reporting requirements to the CTA that are applied at the state level to LLCs operating in New York. It will go into effect on January 1st, 2025.

The NYTLA requires LLCs in New York to disclose ownership information similar to that which is required under the CTA. This information will be publicly accessible through a database managed by the New York Department of State.

Compliance with the CTA and NYTLA can be difficult, especially when an LLC is owned by a trust. The New York business planning lawyers at Pierro, Connor & Strauss, LLC can help you navigate the complexities of reporting requirements for LLCs, including under ownership by a trust.

Call Pierro, Connor & Strauss for Advice on Trust Ownership of an LLC

The New York estate and trust attorneys at Pierro, Connor & Strauss offer comprehensive estate planning services that include the formation of asset protection trusts and administrating and managing the processes required to establish LLC ownership by those trusts.

Please call any of our offices in New York City, the Albany capital region, Hudson Bay, Ronkonkoma, Falmouth, Garden City, Utica, or Clark, NJ to schedule an appointment with one of our attorneys. We look forward to addressing your questions and concerns and helping you develop the optimum estate plan for your LLC ownership and all your personal and real estate assets.

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