Business Trust Formation refers to the creation of a trust structure that holds and manages assets for business purposes, typically in the form of Real Estate Investment Trusts (REITs) or Infrastructure Investment Trusts (InvITs). In a business trust, the ownership of assets is held by the trust, and the beneficiaries (often investors) receive returns from the income generated by those assets.
The trust is governed by a trust deed, which outlines the terms of the business operations, including the rights and duties of the trustee, the structure of the beneficiaries, and the income distribution mechanism. A business trust is designed to provide tax-efficient structures for asset management, allowing income generated by the trust’s assets to be passed on to the beneficiaries without being taxed at the corporate level.
The process of forming a business trust involves setting up a trustee, typically a financial institution or trust company, and registering the trust with the appropriate regulatory authorities. The trust then manages assets such as real estate, infrastructure projects, or financial investments, and the beneficiaries, who are typically investors, receive income through dividends or distributions.
