LLP vs PRIVATE TRUST which is better,joint family fund properties are purchased in individual names

Namaskar, We are two brothers having movable and immovable properties in name of individual names of our wives ﹠ children names , now our both parents wants to make family settlement deed and wants to make create rights in each other properties , does it possible my making a family settlements only? all family members who has properties in their names will give their written consent/signature in this deed and it is accepted by all family members that they will gift it to a new Family LLP or Private Trust, after making it all revenues (by sale or by rentals) from their own properties will share to each member of family means both brother’s wives ﹠ childrens equally by making this family settlement deed or LLp or a private trust. Is it possible? Please give your valuable suggestions.

Thank you.

Namaskar Ajay ji,

Your question touches on important aspects of family wealth management and property rights. You want to create a family settlement deed and possibly create a Family LLP or a Private Trust to hold and manage movable and immovable properties owned individually by family members (wives and children). Here’s a detailed comparison and suggestions for your situation:

1. Family Settlement Deed

A Family Settlement Deed is a legal agreement among family members to settle their mutual claims on properties and assets.
It can create rights and obligations among family members without transferring the actual title immediately.
All owners (your wives, children) can agree in writing and sign this deed.
It can regulate sharing of income from properties (like rent or sale proceeds).
But a settlement deed itself does not create a separate legal entity to hold/manage properties.

2. Family LLP vs Private Trust

Family LLP (Limited Liability Partnership)

Advantages:

LLP is a separate legal entity and can hold assets in its name.
Provides limited liability to partners.
Flexibility in profit-sharing as per LLP agreement.
Transparency: Annual filings, audited accounts (if turnover thresholds exceeded).
Easy to admit/remove partners.
Can conduct business, buy/sell property.

Disadvantages:

Formal registration and compliance with MCA.
Taxed as partnership firm; profits are taxed in hands of LLP.
Capital gains tax will apply when properties are transferred to LLP (as sale/transfer).
Stamp duty implications for transfer of immovable property.
Loss of direct control for individual members over specific assets.

Private Trust (Family Trust)

Advantages:

A Trust is a flexible vehicle for managing family assets.
The Trustee(s) hold legal title; beneficiaries get income/assets as per trust deed.
Can include family members as beneficiaries (wives, children).
Avoids partition disputes through clear terms.
Can save/protect wealth for future generations.
Income can be distributed per trust deed to beneficiaries.

Disadvantages:

Trusts do not have separate legal status like LLP; trustees are personally responsible.
Taxation can be complex; income of trust may be taxed at maximum slab rates if not distributed.
Transfer of property to trust may attract stamp duty.
No "limited liability" protection.

3. Is it Possible?

Yes, family members can enter into a Family Settlement Deed agreeing on rights and profit sharing.
You can then transfer properties to a Family LLP or Private Trust as agreed.
Transfers will be subject to stamp duty, capital gains tax, and registration charges.
Income from these properties can be shared equally or as per agreement.
All parties must consent and sign the settlement deed.

4. What Should You Choose?

Criteria	Family LLP	Private Trust
Legal Entity	Yes, separate legal entity	No, trust is a relationship
Liability	Limited liability to partners	Trustees personally liable
Compliance	Annual filings, audits above threshold	Minimal formalities
Taxation	Partnership firm taxation	Complex; trust taxed at max rates if income retained
Control	Partners share control as per LLP agreement	Trustees control; beneficiaries benefit
Transfer of Property	May face capital gains & stamp duty	Also faces capital gains & stamp duty

5. Additional Notes

Since properties are currently in individual names (wives, children), transferring them to LLP or Trust involves sale or gift deeds which have tax and stamp duty implications.
Consult a CA and lawyer for proper drafting to minimize tax impact and ensure smooth operation.
Family LLP is better if you want a business-like structure with limited liability.
Private Trust is better for succession planning, asset protection, and flexible distribution.

Summary Recommendation

Start with a Family Settlement Deed to clearly record everyone’s rights and intentions.
Consider setting up a Family Trust if your main goal is wealth preservation and distribution.
Consider a Family LLP if you want a formal structure for joint management and business activities.
Get expert legal and tax advice before transferring properties.