A Business Trust is a type of unincorporated business organization which operates much like a corporation. The trust is managed by trustees for the benefit of its owners, who are known as beneficiaries. These beneficiaries hold “units” in the trust, which are similar to shares of stock in a corporation.
Business Trusts are often used in the real estate industry to pool investor funds for the purchase, management, and sale of property. This type of entity is known for its flexibility and the legal protections it offers to the trustees.
One common example of a Business Trust in real estate is a Real Estate Investment Trust (REIT). REITs are companies that own, operate or finance income-producing real estate. They allow individuals to invest in portfolios of real estate assets the same way they would invest in other industries – through the purchase of individual company stock or through a mutual fund or exchange-traded fund.
The main advantage of investing in a Business Trust, such as a REIT, is that it allows investors to gain exposure to real estate without having to buy, manage, or finance properties themselves. Additionally, by law, REITs must distribute at least 90% of their taxable income to shareholders annually in the form of dividends, making them an attractive investment for income-focused investors.