A Massachusetts trust is a type of trust set up for the purpose of business. This type of business structure originated in Massachusetts, but businesses do not have to necessarily be located in Massachusetts to use this form of business. Many businesses prefer this structure because it allows them to cut back on paperwork and potentially lower taxes.
The Massachusetts trust was invented in 1827. It was first used in the state of Massachusetts and then was later recognized as a viable business structure by the United States Supreme Court. It is referred to as a Massachusetts trust because it originated in this state, but residents of other states are free to use the structure as needed. It was originally used as a method of getting around laws which required permission from the state to start a business.
A Massachusetts trust is also sometimes referred to as an unincorporated business organization. Since businesses under this structure are not incorporated, they do not have to abide by the same strict rules as businesses that are incorporated. Many of the businesses that use this business model are mutual funds or other types of investment companies. This is not a business model used by traditional businesses that are selling products or services.
With a Massachusetts trust arrangement, owners of the trust will be considered trustees. The profits and property of the trust will be passed on to the trustees of the organization. As an owner in this type of structure, the owners will receive certificates of ownership.
When a Massachusetts trust is used, investors in the trust will provide a trustee with the ability to manage everything. In many cases, this trustee is the fund manager of a mutual fund. The investors who have certificates of ownership in the trust will not be responsible for anything else beyond their initial investment in the trust. This means that the investors are not responsible for losses beyond what was originally invested in the Massachusetts trust arrangement.
One of the big advantages of this type of business model is that it provides investors with a form of hands-off management. Instead of having to start a business and actively manage it, investors can put their money into this type of business structure and allow someone else to handle everything for them. This is a very similar arrangement to a general partnership.
