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      Delaware Statutory Trust (DST)

      DELAWARE STATUTORY TRUST ("DST")

      2. The DST is a trust that is formed pursuant to the laws of the State of Delaware, and is an excellent product for Californian investors. Like the parent Series LLC, the DST allows for anonymity and lawsuit protection. The DST also works with the individual child Series structure (just like a parent Series LLC), so it is infinitely scalable. In other words, the structure is exactly the same as the parent Series LLC, in that there is a parent that creates individual child series. However, instead of the term "LLC", there would be the term "Trust". As an example, instead of Sample Series LLC, it would be Sample Series Trust. And instead of Sample Series LLC - Series A, it would be Sample Series Trust - Series A.

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      3. The reason the DST is ideal for California residents is it avoids the $800 a year Franchise Tax that California charges LLCs. Since the structure is a Trust and not an LLC, it does not trigger the Franchise tax.

        1. If the Client owns multiple LLCs to hold multiple properties, that yearly Franchise tax adds up to an awful lot of money. Using the DST structure, the Client can own multiple properties in individual child Series without the need for multiple LLCs.

        2. Therefore, not only does the DST save in costs, it allows the Client to efficiently compartmentalize and separates each asset into individual child Series.

      4. CA's Franchise Tax law is very broad/vague. Meaning several situations may trigger the $800 a year franchise tax. In determining whether the Client should opt for a DST over a parent Series LLC, the following situations may occur:

        1. The Client is a CA resident looking to form a foreign LLC and own foreign property. What this means is the Client lives in CA, but would like an LLC in another state, such as Texas, and own property outside of CA. In this situation, even though the LLC would be foreign, the Client is a CA resident and due to the broadness of the law, the Franchise Tax could be triggered. However, CA has yet to enforce the Franchise tax in this situation, that RLS knows of, so the probability is probably fairly low. It is good practice to fully disclose this to the Client and allow him/her to choose which business structure, the DST vs the parent Series LLC, that he/she feels the most comfortable with.2. The Client is a CA resident looking to form a foreign LLC and own property in CA. What this means is the Client lives in CA, would like an LLC in another state, such as Texas, but will on property in CA. In this situation, although the Land Trust (under the parent Series LLC) will technically own the property, it would be good practice for the Client to opt for a DST because the property is located in CA and the Franchise Tax may be triggered.
        3. The Client is a Non-CA resident looking to form a foreign LLC and own property in CA. What this means is the Client lives outside of CA, is looking to form an LLC in another state, but will own property in CA. Again, although the Land Trust (under the parent Series LLC) will technically own the property, it would be good practice for the Client to opt for a DST, or form a completely separate CA LLC to hold just that one property, because the property is located in CA and the Franchise Tax may be triggered.
      5. Like the parent Series LLC, the DST can also be owned anonymously, and each asset that is compartmentalized in the individual child Series of the DST can also be held anonymously.