In Texas, Limited Liability Companies (LLCs) are one of the most popular business structures thanks to their flexibility, liability protection, and tax advantages. But one question that often comes up—especially in estate planning and asset protection circles—is:
Can a trust own an LLC in Texas?
The short answer: Yes, a trust can own an LLC in Texas. In fact, it’s a common strategy used to protect assets, manage succession planning, and reduce tax burdens.
In this article, we’ll cover:
- What it means for a trust to own an LLC
- Types of trusts that can own an LLC in Texas
- Why use a trust to hold LLC ownership
- Legal and tax considerations
- How to structure this setup correctly
What Is a Trust?
A trust is a legal entity that holds assets on behalf of beneficiaries. A trust involves three main parties:
- The grantor (also called settlor or trustor): the person who creates the trust
- The trustee: the person or entity managing the trust assets
- The beneficiaries: the people or entities who benefit from the trust
What Is an LLC?
A Limited Liability Company (LLC) is a business structure that offers personal liability protection and flexible tax options. In Texas, an LLC can have one or more owners (called “members”)—and those members can include individuals, corporations, other LLCs, or trusts.
Can a Trust Own an LLC in Texas?
Yes. Under Texas law, a trust can legally own part or all of an LLC. In this case, the trust itself becomes the member (owner) of the LLC.
This setup can apply to:
- Revocable Living Trusts
- Irrevocable Trusts
- Family Trusts
- Asset Protection Trusts
- Testamentary Trusts (created by a will)
Example
John sets up a revocable living trust to manage his personal and business assets. He forms a Texas LLC to own a rental property and names his trust as the sole member of the LLC. This way, when John passes away, the LLC’s ownership passes smoothly to his beneficiaries without going through probate.
Why Use a Trust to Own an LLC?
1. Estate Planning
Avoids probate and ensures smooth transfer of business ownership to heirs.
2. Privacy
Keeps ownership details more confidential than naming individuals directly.
3. Asset Protection
Irrevocable trusts may shield LLC ownership from creditors, depending on the structure.
4. Succession Planning
Makes it easier to designate a successor trustee who can manage the business without court involvement.
5. Control
The trust’s terms can outline exactly how the LLC should be managed and by whom, even after the grantor’s death.
Tax Considerations
- Revocable Living Trusts: These are typically disregarded for tax purposes. The LLC remains taxed as a pass-through entity (sole proprietorship, partnership, or S corp) based on its election.
- Irrevocable Trusts: These are treated as separate taxable entities and must have their own EIN. The LLC may be taxed differently depending on trust structure and income.
Consult a tax professional to ensure compliance with IRS rules and state taxation requirements.
How to Title LLC Ownership in a Trust
If you want your trust to own the LLC:
1. Create the Trust (revocable or irrevocable)
2. Form the LLC and list the trust as a member in the LLC’s Certificate of Formation or Operating Agreement
3. Use the full legal name of the trust (e.g., “The John Smith Living Trust dated January 1, 2024”)
4. Update your Operating Agreement to reflect trust ownership
5. Obtain or update your EIN if needed (especially for irrevocable trusts)
6. Keep documentation in order in case of IRS audits or legal matters
Legal Considerations in Texas
- Texas does not restrict trust ownership of LLCs.
- Operating Agreements should clearly define who has voting and management authority (the trustee, not the beneficiaries).
- If the trust is irrevocable, ensure that it doesn’t trigger unintended tax consequences or gift tax issues.
Final Thoughts
Yes, a trust can own an LLC in Texas—and in many cases, it’s a smart move. Whether you’re managing real estate, a family business, or planning for your legacy, combining a trust with an LLC can help secure your assets and ensure a smoother transition to future generations.
Always consult with an attorney or CPA when structuring trust-LLC ownership to ensure it aligns with your estate plan and complies with Texas and federal laws.
At FormLLC, we assist clients across Texas in forming LLCs, drafting operating agreements, and working with estate planners to ensure trusts are properly integrated with business structures.
