Legal Definitions - UBO

UBO stands for unincorporated business organization. It is a type of business arrangement that is used instead of a company or partnership. In this arrangement, the investor acts as the settlor of the trust and gives the management rights to the trustee. The trustee holds the title to the property for the benefit of the beneficiaries for investment purposes. The investor/settlor has limited liability for their investment (trust property) only, which is similar to a limited partnership.

For example, let's say that John wants to invest in a real estate property. Instead of forming a company or partnership, he decides to create a UBO. John acts as the settlor of the trust and gives the management rights to the trustee. The trustee holds the title to the property for the benefit of the beneficiaries, which could be John and other investors. John has limited liability for his investment in the property, which means that he is only responsible for the amount of money he invested in the UBO.

UBOs are also known as Massachusetts trusts, common law trusts, or business trusts.