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Why do I need a trust company if there is an offshore company?

2018-08-24

A trust company is a legal entity acting on behalf of a legal or judicial person as a fiduciary or agent, and also as a trustee. It is needed to keep assets, and also to manage them and transfer them to beneficiaries.

The difference between a trust and a commercial company

The question of whether it is possible to replace the trust with an ordinary commercial organization is common. The main goal of a commercial company is to increase profits. Subsequently, revenue can be distributed or sent to improve the company. It is possible to attract borrowed capital. The meaning of the activities of the trust company is to preserve and increase the assets that have been transferred to management, as well as their transfer to the beneficiaries.

A commercial organization can be declared as bankrupt. In this situation, it will be responsible for the liabilities of the assets. Shareholders can respond with personal property. The trust company in the event of bankruptcy or liquidation will only answer with personal property. Assets of trusts will not be involved in the liquidation procedure.

Can a commercial organization provide trust services

The question of whether a commercial organization can keep a trust and manage assets without having a license is relevant.

There are some negative consequences of this activity:

• If this fact becomes known, sanctions will be applied to the organization in the form of a fine for the activities carried out. Directors, founders will be fined, subsequently they can be disqualified;

• If the fact of the violation occurred on the territory of the European Union, violators can be deprived of a residence permit or a Schengen visa. It is possible to establish a criminal case;

• Subsequently, a trust company will be required to obtain a license. The accounts are frozen before the execution of all necessary measures;

• The trust can be considered fictitious;

• Since assets are not considered trust income, but as commerce, revenue will be taxed at a high tax rate, with penalties and other penalties taken into account.

Based on this, non-compliance with existing rules can lead to unfortunate consequences and significant losses.

Pros of a trust company

There are some advantages to buying a trust company. So, the income from assets is not taxed, as they are the property of the trust. A commercial organization that earns profits from assets pays taxes at the location. Is it possible in this case to register an offshore company? The answer is yes if the person opens a bank account that will not be blocked. This action is almost impossible to perform.

A commercial organization has some limitations that are related to the charter. The trust company has fewer restrictions. In addition, a commercial company can not move, because it is necessary to undergo the liquidation procedure, and subsequently reopen in another place.