Michigan LLC
Yes, a trust can be a member of an LLC, allowing it to invest in or hold ownership in the company while maintaining legal and financial separation.
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Last Updated: April 6, 2026
If an individual is looking to start a business that offers limited liability and probate protection, odds are they’ve come across the terms “LLC” and “trust” in their research. Each one could solve half of that problem, but it raises a question: can a trust be a member of an LLC?
The short answer is yes, but first, it’s essential to understand the relationship between LLCs and trusts. This guide will provide information about trust-owned LLCs.
Yes, a trust can be a member of an LLC (an owner of an LLC is referred to as a “member”). So yes, a trust can own a limited liability company. In fact, a trust-owned LLC can be a valuable tool in estate planning.
Here’s how it works: an LLC is a business structure offering personal asset protection while avoiding double taxation. A trust is a legal arrangement in which a grantor transfers ownership of assets to a trustee to benefit one or more beneficiaries. Hence, entrepreneurs can enjoy the benefits of both legal entities by placing their LLC membership interests in a trust.
Whether someone has a stake in a single-member or multi-member LLC, their LLC membership interests are treated as personal property. This means a person’s membership interest can be subject to probate upon their demise and could potentially be claimed by creditors. Therefore, it’s reasonable to have a plan to protect the LLC now and control what happens to the business in case of the owner’s demise or incapacitation.
There are two ways to set up the trust ownership of membership interests in an LLC. They include an LLC revocable trust and an LLC irrevocable trust.
An LLC revocable trust is set up in a way that the grantor still has control over the LLC. The grantor may withdraw assets from the trust. With a revocable trust, the trust can be terminated or changed during the grantor’s lifetime.
In the event of the grantor’s death or incapacity, the terms of the trust determine what happens to the assets. Most times, the trust’s assets are distributed to the beneficiaries. In some cases, the trust continues to manage the assets and pays income to the beneficiaries.
As the name suggests, an LLC irrevocable trust can’t be easily revoked or changed once created. In this case, the grantor loses control or access to the LLC. Someone else is named the beneficiary, and the grantor forfeits any income from an LLC placed in a trust. Since the grantor has no control or access to the trust’s assets, the LLC membership interests are protected from creditors’ claims.
However, there’s a form of irrevocable trust known as a domestic asset protection trust that allows grantors to keep control over the asset (see the domestic asset protection trust definition guide for more information). This means grantors can enjoy the benefits of both irrevocable trust asset protection and revocable trust asset control. Domestic asset protection is restricted in some states, but an individual doesn’t need to be a resident to set up a trust in a particular state.
The law will permit a person to transfer their membership interest to a trust, but the operating agreement might not. Hence, it’s imperative that an LLC member first confirms that the operating agreement accommodates this transition. If not, the member will need to seek the consent of other members or amend the operating agreement if they’re the sole owner. This section explores some of the benefits and drawbacks of having a revocable trust as a member of an LLC.
Probate is the legal process by which the court presides over the distribution of an estate when the owner dies. Aside from ensuring that a person’s business interests and assets are awarded to beneficiaries in their will, probate helps ensure their debts are settled.
The probate period can last weeks or months. The deceased owner’s business interest is left unattended during this period, which increases the risk of operational problems. Placing membership assets in a trust can make the transition smoother and save beneficiaries from this strenuous process.
An estate settled through probate is a matter of public record. This means that with some research, non-beneficiaries like disinherited heirs, creditors, and scammers can learn details about the estate. Since trusts cut out the entire probate ordeal, matters concerning the estate remain private.
It’s great thinking when someone makes plans for how their business interests will be managed upon their demise, but sometimes that’s not enough. What happens when an unforeseen circumstance, like an accident or a medical condition, leaves the owner incapacitated? It’s possible to structure the LLC trust so that a trustee is authorized to take charge on the owner’s behalf if they’re incapacitated.
Having a revocable trust as a member of an LLC offers liability and probate protection to a person’s beneficiaries upon their demise (see the member definition guide for more information). However, as long as the grantor is alive, at full capacity, and still has control over the trust, the trust assets, including the LLC membership interests, could be subject to creditor claims.
Another drawback to using this strategy is that it could be expensive. To execute this plan, a person needs to set up an LLC, which involves several expenses. Aside from the initial cost of filing Articles of Organization (see Articles of Organization definition), the owner needs to consider ongoing costs such as annual or biennial reports. Then they have to consider the cost of setting up and maintaining a revocable trust. See the annual reports definition page to learn more about those requirements.
In conclusion, establishing a trust-owned LLC can offer valuable protection for a person’s assets and ensure a smooth transition of business interests. However, it’s essential to consider other factors when structuring a business, such as ownership and employment options. For instance, someone may want to explore whether an S Corporation can own an LLC or if an LLC can own another LLC to further optimize the business setup.
If someone’s considering different organizational models, they may ask, can an LLC be a nonprofit? Or can an LLC member also be an employee? Answering these questions can help entrepreneurs decide which structure best suits their operational needs. Moreover, understanding how to adapt an existing business, like converting a corporation into an LLC or clarifying whether an LLC can have employees, will help entrepreneurs make the right choices for the long-term success of their venture.
If a business owner needs to form an LLC, ZenBusiness can help with that — starting at $0 plus state fees, their many services can help anyone get started today. ZenBusiness provides all the support entrepreneurs need to hit the ground running.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
Yes, but only if it’s a grantor trust. A grantor trust is when the owner controls the income and assets of the trust. In that case, the grantor (not the trust) must pay taxes on the trust’s income.
A trust can function as a general partner in a family limited partnership (FLP) but not as a limited partner.
Yes, a trust can own an LLC. A trust can own almost any asset, including membership interests, in an LLC the grantor owns.
The disadvantages of a revocable trust include no personal asset protection from creditors and no exemption from income and estate taxes.
Yes, an LLC can be named as a beneficiary of a trust. When someone creates a trust, they have flexibility in who or what they can name as a beneficiary, including individuals, other trusts, and business entities like LLCs.
However, the specific rules may vary by state, so it’s important to consult with an attorney to ensure this structure aligns with the grantor’s goals and complies with the state’s laws.
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