What Are The Benefits Of A DST?
- Written by Briony Watts
A DST is a legal structure that can establish an investment vehicle for business purposes. It has gained popularity in the U.S., especially with businesses that form.
Why? Because its flexibility provides many advantages over other types of entities or financial tools. Because it’s so popular among high-net-worth individuals, learn about its advantages. The key benefits include:
This legal structure provides business owners with a lot of versatility in managing their funds. For one, the trust does not have specific requirements for membership or capitalization.
There is no limit on how many members can be part of a Delaware statutory trust, and all they need to do is contribute assets. They can also withdraw from an account during its existence by filing paperwork through the trustee’s office.
The entity has low tax rates that usually depend on whether distributions occur yearly or quarterly. If you make monthly payments, your income should remain stable over the year, allowing you to enjoy a lower tax rate.
One of the most significant benefits of using a statutory trust is that it helps you avoid double taxation. Unlike a corporation, which always faces this risk, a DST can be taxed as either an S-Corp or C-Corp. Thus, save on taxes depending on your needs and business structure. This flexibility makes it easier for entrepreneurs to file their income tax returns.
Unlike other entities like corporations, where there is a separation between members and managers, everyone involved in a DST has full access to company records. This includes names, addresses, and financial transactions that each member or shareholder carried out. Something that can help avoid legal disputes, as nobody will be left wondering about who handled what actions.
Sometimes, you might not want to disclose the names of all owners involved in a business. A DST can help protect your privacy as it doesn’t need any licenses or official state registration for its creation and operation. Also, with this structure, business owners can limit the number of people who know about their involvement in the company. Also, keep many aspects private, even if they are making major decisions or owning large shares.
Allows for the Creation of Many Tiers of Ownership
There are no limits to the number of tiers that can be built into a DST. To start, you will need at least one shareholder to contribute assets and establish an initial balance sheet for the business.
Subsequently, other parties involved in your company may contribute more funds to establish secondary accounts. This can then give way to tertiary levels, etc., if desired by all members involved in its creation. Of course, this process does not apply, and the number of owners allowed in each tier depends on how much money you contribute.
Another benefit includes maintaining confidentiality in how the trust operates because of limited public access to its records. This can be very helpful when forming strategic alliances with other companies and investors.
Also, it allows them to keep their involvement private until they are ready to make it known if desired. This can be very important if your business deals with sensitive data or information where security and confidentiality are critical to its success. Also, it will help avoid legal disputes involving members who might release private records without permission from higher-ups.
Ease in Transferring Ownership Interests
One of the most practical and used benefits is how easy it becomes to transfer interests in a business when using this entity. All you need to do is notify your trustee’s office where records are kept, sign documents that will be filed with them, and pay any related fees associated with your transactions. This can vary depending on jurisdictional rules.
Another significant benefit of using a DST is that it offers the same level of privacy as an LLC. While still providing all the benefits and flexibility associated with corporations. Thus, you don’t have to worry about sharing sensitive information on your tax return, such as annual revenues or personal salary income.
A DST can provide you with many benefits over other types of structures and financial tools available today. It would help if you learned more about its creation process before deciding.
Also, it is a great way to invest your money if you want something that provides more flexibility and transparency. Make sure you understand all the requirements before committing yourself to this legal structure. This is because it may not be there whenever you need it in the future.