How to Incorporate a Trust

File articles of incorporation or a trust indenture to incorporate a trust.

A trust is an entity that holds assets for the benefit of another. Within a trust, the trustees become owners of the assets—though those owners have a fiduciary duty to the benefactors to act in their best interest. Many charities form charitable trusts to manage assets. Charitable trusts have a unique distinction as the only trust with an indefinite life. The IRS and state governments allow charitable trusts to form as nonprofit corporations, provided they follow specific guidelines.

Instructions

1. Determine the proper type of 501(c) trust to form. IRS Publication 557 spells out all possible nonprofit organization types, several of which concern trusts. Consult the IRS and IRS Publication 557 to determine which 501(c) designation fits your trust.

2. Choose a trust name. Nonprofit trust names may not duplicate existing company names already registered. Additionally, each state’s corporate filing office dictates name eligibility requirements.

3. Write organizational documents for your trust. Different states call these by various names including Trust Indenture, Articles of Incorporation, Corporate Constitution, Articles of Corporation or Corporate Charter. Generally, these define the trust name, the purpose of the trust, legal address of the trust and correspondence information of the corporation owners (typically the owners of the trust).

4. File documents with the state of your choosing. Determine the state of filing based on location and paperwork requirements. File with the corporate filing office of the state, often the Secretary of State’s Office.

5. Apply for recognition as a 501(c) trust with the Internal Revenue Service. The type of nonprofit trust formed determines what paperwork the IRS requires. Refer to IRS Publication 557 to determine the proper forms and procedures for attaining 501(c) trust status.

6. Write corporation bylaws to govern your nonprofit trust. All corporations, including nonprofit trusts, must compile corporate bylaws. Corporate bylaws determine how to name members to the Board of Directors, select trust officers, operate the trust and bring up issues for a vote.

Tips & Warnings

• Hire a lawyer to review all documents and forms to ensure completeness.

• Certain types of trusts have a limited lifespan and may not incorporate; organize your trust as a charitable trust to follow legal procedure.

References

• CharityTrusts: Charitable Trusts-What Is a Trust?
• Internal Revenue Service: Publication 557, Tax-Exempt Status for Your Organization
• Nolo: How to Form a 501(c)(3) Corporation
• Michigan Department of Energy, Labor and Economic Growth: Review Procedures for C&S 500-Articles of Incorporation for Domestic Profit Corporations

Resources

• Internal Revenue Service: Application for Recognition of Exemption
• CharityTrusts: Charitable Trusts-IRS 501c3 Information