Is It A Service? or, Is It A Business?

What type of business structure best fits professional fiduciaries? Part 1

Professional Services Offered

When professional fiduciaries take on clients, we work for the benefit of a living person who needs help making decisions and after a death, for the beneficiaries of the estate. We are licensed by the state of California to be estate Administrators, Conservators, and private trustees. We are a bit like family members who take on these roles out of obligation, duty or love: but we are not like family members in a number of ways.  One of these is we are not part of the family system.  This means we tend to be able to work towards the goal and minimize inter-family conflict. The other is that we charge reasonable fees for our services.

Sometimes a family member chooses not to collect fees for this work (although they are entitled to do so).  Professional fiduciaries are building a professional presence through our practice, and we earn fees for this vital service; but is it a business?

The work of a fiduciary is a cross between personal services and business management.  Professional fiduciaries handle much of the same type of work as a bank trust department, but we can also offer the types of services that banks cannot  -  Conservatorships and Financial or Health Agent.  The nature of our “business” is personal. We often form deep, abiding, long-term relationships  with our clients and their family. 

Business Formation

Businesses are formed to better organize people into focused activities to serve clients in a consistent and dependable manner. Because a corporation is deemed a “person” under the law, business owners sometimes form a  corporation, even when there is only one owner and that owner is the only employee.  Business owners do this because a properly formed and maintained business structure can shield the individual owner from business liability. Individuals create a business structure to shift some expenses to business expenses; hire employees; and, create an entity that can be sold or passed on to the next generation. 

These are all reasons that some professional fiduciaries have used a corporate form for their businesses.  A commonly used business structure in California is an S-Corp. While useful to many types of small service businesses, it may not be helpful in offering fiduciary services.

The form of a business structure is determined by state law.  Each type of structure approved under California law has a different purpose. Some, like limited liability partnerships, are only available to certain types of professions (for example, attorneys) not to fiduciaries.  If you would like an overview of issues surrounding business formation and structures, send an email or post a comment below.

 

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