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Difference Between Trust and Company (With Table)

Many people come together to form different organizations to handle various works. Some organizations act as profitable enterprises which provide beneficiary services to customers in exchange for money. Other groups are non-profit, such as those in charge of social services or businesses with the concept of no profit or no loss.

A trust and a company are two different types of organizations that deal with different aspects of the world. Trust is a business entity that can be lucrative or non-profitable. On the other hand, a company is an entity that delivers services to clients by earning profit from them.

Trust vs Company

The main difference between a trust and a company is that a trust is a non-profit corporation classified as a non-government organization (NGO) under the fiduciary concept.  On the other hand, a company can be either governmental or private to provide goods and services to the customers to earn the requisite profit.

A trust is formed under section 3 of the Indian trust act of 1882(ITA). Under this notion, a trustor decides, under the supervision of a legal person, to transfer his earnings to a trusted person who can utilize them to benefit others. As a result, trust organizations are never set up for-profit like a company.

A company is established under The Indian company act of 2013 by following the rules laid out in it. It can be privately owned or owned by the government, which holds a 51 percent share. The firm owner’s goal is to sell products as well as make money to have higher turnovers.

Comparison Table Between Trust and Company

Parameters of Comparison TrustCompany
Owned byIt is owned by the trusteeIt is owned by the owner of the company, who holds a maximum stake.
Under ActIt is formed under the Indian Trust Act.It is formed under the Indian Company Act.
EarningIt earns no profit.It aims to earn money in terms of profit.
Type of organizationIt is a non-governmental organization (NGO).It can be a governmental or private firm.
Minimum number of membersTo form trust, at least two members must be present.A government company needs at least seven individuals, and a private one needs a minimum of 2.

What is Trust?

A trust is a legal entity established by a trustor (who wishes to donate his assets) in trust for a trustee (who oversees the organization) with legal help. Trustor opens such organization to benefit the third party.

It was established by the Indian Trust Act of 1882, which mandates a written contract known as an instrument of trust when transferring assets to the trustee. This document contains all of the legal words about a trust’s information.

A trustor must specify the goal of founding a trust organization along with his intention when organizing a trust. In addition, remittances must be made on behalf of a trustee who is eligible to receive salary under Article 6 of the Trust Law of India.

There are four primary types of trust: a revocable trust, an irrevocable trust, a public trust, and a private trust. Starting with a revocable trust that allows changes can be made in the trust while the owner is still alive. As for irrevocable trusts, once they have been formed with all legalities, they cannot be amended.

In the public trust, the beneficiaries, such as the poor or illiterate, benefit. Private trusts are created for individual beneficiaries rather than the public, and unlike public trusts, they are nearly always ephemeral.

What is Company?

Co. is a short name used to represent any company. According to the Indian Company Act, updated in 2013, any person can establish a company. It means that it can be owned by the government or even a private individual who meets all the ICA’s legal requirements.

The goal of developing any company is to supply a wide range of goods and services to customers, such as daily necessities, luxury items, or other services, in exchange for money and profit.

According to the laws for running a business, if the government wants to operate a company, it must have seven or more employees. At least two employees are necessary to create a private corporation. There is also the possibility of a one-person business.

A few advantages of government enterprises include the fact that there is transparency within the company, which means the quality of the product is not compromised, and the price is also low. Private corporations have the advantage of requiring no minimum capital to establish and display an individual’s financial standing.

The group or individual with the highest ownership in the company owns all the tangible (cash, building, and vehicle) and intangible (patents, copyrights, and goodwill) assets. The owner is also responsible for the environment.

Main Differences Between Trust and Company

  1. The Indian Trust Act of 1882 governs the formation of trusts. On the other hand, a company is formed by following the guidelines of the Indian Company Act.
  2. The trustee makes crucial choices in the trust organization. However, the company’s major decisions are made by the owner.
  3. The trust is always a non-governmental organization. On the contrary, a company can be held by a government, individual, or group of individuals.
  4. Trust aims to provide advantages to a third party (beneficiaries). The advantage of starting a company is that it benefits customers, employers, and the boss.
  5. Annual filing of returns is not required under the trust. However, to avoid legal action, companies must file a yearly return.

Conclusion

Both, trust, and the firm are separate entities that operate in distinct ways. A trust is a philanthropic organization in which a wealthy trustor gives some or all of his assets to the trustee for the benefit of others in need. However, the company’s owner considers his and others’ interests when providing high-quality services in exchange for money.

A minimum of two members are necessary to form a trust organization (trustor and trustee). A state-owned enterprise requires a minimum of 7 employees to operate, and a minimum of 2 employees must be part of a private enterprise.

References

  1. https://books.google.com/books?hl=en&lr=&id=Any7AAAAIAAJ&oi=fnd&pg=PA7&dq=trust+and+company&ots=E9xqxsv_QY&sig=ubVnRjGRaeQTNp-gEUUdJ1nqtxQ
  2. https://ecommons.cornell.edu/handle/1813/71431
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