Also known as:business trust · Massachusetts trust · common-law trust
Written by attorneys · grounded in primary & secondary sources — see below
A trust created for a commercial purpose such as organizing a mutual fund or facilitating asset securitization. Business trusts are formed under common law or statute as part of a commercial transaction rather than to effect a donative transfer.
Sources & Authorities
How it applies
Common Examples
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Business Trust General Partner Dissolves
Boreal Energy, organized as a business trust under Massachusetts law, serves as the sole general partner of a limited partnership developing an energy project with Bayside Shipping as limited partner. When Boreal Energy's trustees vote to dissolve the trust to restructure its holdings, the limited partnership remains midway through its multi-year obligations. Because Boreal Energy qualifies as a business trust, the statutory provision treating willful dissolution as wrongful dissociation does not apply to it.
Business Trust Partner Withdrawal
Baxter Dynamics, formed as a business trust, joins two corporations in a general partnership to construct a commercial facility expected to last two years. Midway through construction the trust's managers approve dissolution to pursue a separate securitization deal. The remaining partners must hire replacements and incur added costs. The business-trust status of Baxter Dynamics prevents the dissolution from triggering the statutory category for wrongful dissociation.
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7
Practice Questions2
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Uniform Acts
Model Codes
Casebooks
Common questions
Frequently Asked
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How do business trusts differ from donative trusts?+
Business trusts are created to carry out commercial transactions such as mutual funds or asset securitizations. They rest on freedom of contract rather than freedom of disposition. Donative trusts, by contrast, are designed to transfer property at death or for family purposes.
Supporting sources
Why are business trusts carved out of the wrongful-dissociation rules that apply to other entities?+
Uniform acts treat a business trust as a distinct category of person. The provisions that make willful dissolution by a corporation or other non-trust entity wrongful therefore do not reach a business trust. This preserves the contractual flexibility that defines business-trust arrangements.
Are business trusts considered registered organizations under the UCC?+
A business trust qualifies as a registered organization when state law requires the filing of its organic record with the state. In that case the trust's initial filing and any amendments constitute the public organic record that perfects security interests.
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