Is it legal toturn a business intoa trust without the knowledge of the partners?

UPDATED: Jan 13, 2012

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Is it legal toturn a business intoa trust without the knowledge of the partners?

I’m a 10% partner in my husband’s company. Recently I found out he changed the company into a trust and will no longer pay me any dividend even though I’m working full-time for it. If I find that the trust was created to do malpractices like tax evasion or non-payment to all members, can it be dissolved? Does creating a trust take away my stake of the partnership and the rest of the partners, or do we still have our own percentages and are still stake holders? Who decides how the payments are done and are fair?

Asked on January 13, 2012 under Business Law, Virginia


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

A business cannot per se be turned into a trust. Rather a business can be held in a trust. However, all owners of the business before it was transferred into a trust had to be advised of this. Most importantly, only each person's ownership interests in the business can be held in a trust as agreed to by him or her.

Your ownership interest in the business cannot be placed in this trust without your written consent. From what you have written, you need to consult with a business attorney. You still own your share of the business even if your share was placed in the trust with or without your consent. This is true as to the other business partners' interests.

The payments paid should be made as originally agreed to. Possibly your husband only placed his ownership of the business in the trust as an estate planning vehicle which is acceptable. Depending on the trust's language it can be dissolved voluntarily.

I suggest that you have a face to face meeting with your husband as well as to his intent for the creation of the trust that you have written about.


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