People with financial/business/legal/real estate expertise: is there a legitimate reason for having ~500 legal entities in Trump org. ?
I can understand splitting some stuff to manage liabilities, but this looks more like obfuscation than risk management. Pleas explain how I’m wrong.
Do you have a link that show these 500 or so entities?
From another thread
“ Trump’s holdings consist of a global network of roughly 500 entities spanning real estate, licensing and other business ventures.”
In my experience doing environmental consulting for apartment projects, each development had its own legal partnership, depending upon the investors and funding sources involved, all for the same developer. A multi-phase project may have a separate partnership for each phase. Plus, the developer owned separate business entities for property development, architecture, construction, and eventual management of the completed & occupied projects.
I know nothing about Trump’s particular collection of companies, but I would expect it to be perfectly normal for each property to have a separate one. Wouldn’t be too hard to accumulate 500 companies over several decades as a developer.
In short:
A limited liability company (LLC) is a business structure in the U.S. that protects its owners from personal responsibility for its debts or liabilities.
Example:
SOURCE (paywall beyond summary)
Favorable tax treatment, sheltering assets and wealth.
Recall back around 2000 Trump went ballistic over Rosie O’Donnell’s comment that he’d gone bankrupt. In fact, DT personally had neve gone bankrupt - but several of his sub-companies had. This is precisely why they were compartmentalized this way. A casino that fails, (who loses money running a casino?) Trump was not personally liable for the debt. The bankruptcy could only go after the assets of that one company.
Presumably, every business does this when part of their business is risky. Plus, it allows the owner to sell shares in what is purported to be a profitable enterprise - sell 49% of the shares of this casino or office tower, keep control, get other people’s money too. (Trump also would put his name on the tower or whatever, and then charge the company a license fee for the use of his name, thus taking money out of the company before the remaining profit is distributed to the shareholders.)
It’s notable that when Trump needed to refinance one of his office towers a few years ago, the bank demanded he personally guarantee the loan - so not just that one small subcompany was liable, he personally was too.
His business is global. If you operate in another country you have to set up legal entities in that country, many times more than one to achieve the tax and risk corporate objectives. 500 doesn’t seem to many to me from a general corporate perspective.
More accurately, this is why corporations exist at all – to distinguish the assets and liabilities of the operation from those of its principals. This is not a uniquely “Trumpy” thing to do, firewalling a business away from its owners’ fiscal identities.
The main distinctive of Trump’s approach is how deeply the shell corporations nest, and how frankly bad some of them are at their business.
Would you call such a construction for owning a helicopter normal or would you characterize it as a overly complicated?
I vaguely recall a case from my Corporations class about the practice of New York taxi companies managing their fleets by establishing numerous corporations, each of which owned a single cab.
I think that there supposed to be insurance benefits, but the main objective was to protect the broader corporate assets while engaging in an industry that was going to likely result in a high number of tort claims.
As I recall, the outcome of the case was the that common owner had failed to follow the corporate formalities as between the various “corporations” and the tort plaintiff was able to treat the assets of the whole entity.
But the point still made sense and makes pretty clear sense if you’re going to operate in numerous industries.
I don’t have a lot of personal knowledge here, so – in FQ – I’m hesitant to try to speak with any authority.
But … it’s my sense that wealthy people will commonly use any combination of (generally legal) tax avoidance and asset protection ‘schemes’ available to them.
As to aircraft ownership, specifically, this article makes it seem fairly common, presuming that aircraft ownership is generally the providence of people of at least better-than-the-median means:
Should You Use an LLC to Own Your Aircraft?
For quite wealthy people who have teams of accountants and attorneys on retainer, I’d expect that owning many classes of personal property via an LLC is rather the norm.
The ownership of the helicopter is 4 levels deep. I guess the question is - are these dedicated to owning one helicopter, or is each company controlling multiple other companies… Sort of like “Who can buy us a copter? Maybe the Scottish assets company has the cash and credit rating. Set up an LLC to buy the copter, owned by the one that controls the Scottish golf course and other assets.”
This. For a “company” doing business in multiple jurisdictions, it is not an unusual arrangement. Whether the particular structure used here is sound legal/tax strategy or a means of avoiding legitimate liability is another question.