When embarking on a business venture, one of the pivotal decisions is choosing the right legal structure. Two commonly considered options are forming a company or establishing a trust. Understanding the nuances, advantages, and benefits of each is crucial for making an informed choice. Let’s delve into the distinctions between a company and a trust, exploring their unique features and guiding you through the process of setting up each.

1. Legal Structure Differences


A company is a distinct legal entity separated from its owners (shareholders). It can enter contracts, own property, and conduct business in its own name.


A trust, on the other hand, is a legal relationship where a trustee holds and manages assets for the benefit of beneficiaries. The trust itself does not have a separate legal identity.

2. Ownership and Control


Ownership in a company is determined by shares. Shareholders own the company, and their influence is proportionate to the number of shares held. Management is typically carried out by directors.


In a trust, the trustee holds legal ownership of assets but must manage them for the benefit of the beneficiaries. Beneficiaries have an equitable interest in the trust assets.

3. Tax Implications


Companies are subject to corporate tax rates. Profits are taxed at the company level before distribution to shareholders, who may also face personal income tax on dividends.


Trusts are generally tax-transparent entities. Income earned is distributed among beneficiaries, who then declare it in their personal tax returns.

4. Flexibility and Purpose


Companies offer flexibility in ownership transfer through the sale of shares. They are ideal for commercial ventures and businesses with growth prospects.


Trusts are often used for asset protection, estate planning, and managing family wealth. They provide a flexible structure for passing on assets to future generations.

Which one is right for you is up to you. Depending on your choice, here are the simple steps to get started.

Setting Up a Company: Overview

  1. Choose a Business Name: Ensure it is unique and complies with legal requirements.
  2. Registered Office: Provide an official address for legal correspondence.
  3. Appoint Directors and Shareholders: Specify individuals responsible for management and ownership.
  4. Memorandum and Articles of Association: Draft and file these documents outlining the company’s rules and purpose.
  5. Issue Shares: Allocate ownership among shareholders.
  6. Register with Companies House: Complete the registration process with the official government registrar.

Setting Up a Trust: Overiew

  1. Identify Settlor, Trustee, and Beneficiaries: Determine the roles of individuals involved.
  2. Create a Trust Deed: Draft a legal document outlining the trust’s terms, including its purpose and asset distribution.
  3. Transfer Assets: The settlor transfers legal ownership of assets to the trustee.
  4. Register with HMRC: Notify the tax authorities of the trust’s existence and its taxable income.
  5. Distribute Income to Beneficiaries: Follow the terms of the trust deed for income distribution.

Conclusion: Informed Choices for Business Success

Choosing between a company and a trust requires a thorough understanding of your business goals, tax implications, and ownership preferences. While a company suits commercial enterprises and growth-focused ventures, a trust offers flexibility for wealth management and asset protection. By navigating the differences and understanding the unique advantages of each structure, you can make informed decisions that align with your business aspirations.

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