LLC Inside a Trust: Taxation and Creditor Risks

Putting an LLC inside a trust adds an extra layer between you and the assets, but it does not make them unreachable. For Brazil's Federal Revenue Service (Receita Federal), the trust's assets stay with the settlor and the LLC is treated as controlled by the settlor (Law No. 14,754/2023, art. 10).

For creditors in Brazil, the rules on fraud against creditors (fraude contra credores) and fraud on enforcement (fraude à execução) apply.

This article covers only the LLC + trust combination. To understand the trust itself, read offshore trust for Brazilians. To compare jurisdictions, see the guide to the 5 main asset protection jurisdictions. Here the focus is what Brazilian law says about the structure once it is set up. Checked on October 3, 2026.

How does an LLC inside a trust work?

The settlor transfers the LLC's membership interests to the trustee, who manages them for the beneficiaries according to the trust deed. The LLC owns the assets: accounts, investments or real estate. Law No. 14,754/2023 (Lei 14.754/2023) defines a trust as a contractual arrangement governed by foreign law that regulates the relationship among settlor, trustee and beneficiaries over the assets named in the deed (art. 12, I). The letter of wishes is a supplementary act of the settlor with instructions to the trustee (art. 12, VII).

The LLC layer has its own protection in the US. Under the Wyoming LLC law, the creditor of a member who obtains a judgment can only ask for a charging order on that member's interest. The order makes the LLC pass on to the creditor the distributions that would go to the debtor. The law says this is the exclusive remedy against the interest and the assets of the LLC, including when the debtor is the sole member (W.S. 17-29-503, subsections (a) and (g)). The official copy of the law we consulted has an update date of July 1, 2021; confirm the current wording before deciding.

This rule is a Wyoming rule. It applies to creditors who collect there, and a Brazilian judge is not bound by it. See below how Brazilian law treats the subject.

How does Law 14,754 tax an LLC inside a trust?

The settlor remains the owner of the assets for income tax purposes, until distribution to the beneficiary or the settlor's death, whichever comes first (art. 10, I and II). The income and gains of the trust's assets are treated as earned by the owner and pay individual income tax (IRPF) under the rules that apply to the owner (art. 10, § 3).

If the trust holds a controlled entity abroad, such as the LLC, it is treated as held directly by the owner, and the controlled-entity rules apply (art. 10, § 4). In practice:

• •LLC with passive income (financial investments, interest, dividends, rents): if its own active income is below 60% of total income, or if the LLC is in a favored-taxation country, the profit is taxed on December 31 of each year, even without a distribution (art. 5, caput and § 5). The rate is 15% on the annual income (art. 2, § 1).
• •LLC with operating activity and high active income: profit determined since January 1, 2024 is taxed when it is actually made available to the owner (art. 6, II).
• •Transparency option: art. 8 allows you to declare the controlled entity's assets, rights and obligations as if they were your own. The option is irrevocable while you hold the entity (art. 8, § 1, II).
• •Change of ownership: when the trust's assets pass to the beneficiary, the law treats it as a gratuitous transfer: a gift if the settlor is alive, or a transfer causa mortis if the settlor has died (art. 10, § 2). The transfer may be treated as having occurred earlier if the settlor irrevocably gives up part of the estate (art. 10, § 1).

The trustee does not pay the tax for you. The settlor or the beneficiary must ask the trustee for the resources and information to pay the tax in Brazil (art. 10, § 5), and the trustee's refusal does not remove the taxpayer's obligation (art. 10, § 8). The same rules apply to foreign-law contracts with characteristics similar to those of a trust (art. 13).

Does the trust stop Brazilian creditors from reaching the LLC?

No. The rule in art. 10 of Law 14,754 applies "for the purposes of this Law", that is, for taxation. It does not decide who owns the assets as against a creditor. For creditors, the Civil Code (Código Civil, CC) and the Code of Civil Procedure (CPC) have two instruments that can reach the transfer of the interests to the trust.

Fraud against creditors (Civil Code, arts. 158 to 165):

• •Gratuitous transfers of assets made by a debtor who is already insolvent, or who is made insolvent by them, may be annulled by unsecured creditors, even if the debtor is unaware of the harm (art. 158). Onerous contracts may be annulled when the insolvency is notorious or the other party has reason to know of it (art. 159).
• •The action may be brought against the debtor, the party who contracted with the debtor, or third-party acquirers in bad faith (art. 161). Once the transaction is annulled, the proceeds return to the estate for the concurrence of creditors (art. 165).
• •The deadline to seek annulment is four years, counted from the day of the transaction (art. 178, II).
• •Ordinary transactions indispensable to keeping the business running or to the subsistence of the debtor and family are presumed to be in good faith (art. 164).

Fraud on enforcement (CPC, art. 792): the sale or encumbrance of an asset is considered fraud on enforcement, among other cases, when, at the time of the act, a lawsuit capable of making the debtor insolvent was pending (item IV). The act is ineffective as against the enforcing creditor (art. 792, § 1).

The practical consequence is a matter of timing and purpose. Anyone who transfers interests to a trust with overdue debts, a pending lawsuit or a concrete risk of insolvency is exposed to these two instruments. Anyone who organizes assets before any litigation, for succession or management purposes and with documentation of the source of funds, reduces that risk but does not eliminate it. No structure offers immunity, and analysis of the specific case is for a lawyer.

What reporting obligations come with the structure?

In Brazil:

• •DAA: the trust's assets and rights are declared by the owner, not by the trust (art. 11 of Law 14,754 for the base date of December 31, 2023). The controlled entity's profits come from an annual balance sheet, in IFRS or Brazilian accounting standards (only Brazilian, if the controlled entity is in a favored-taxation country), converted at the closing rate of the last business day of December (art. 5, § 10).
• •CBE (Central Bank): Resolution BCB 279/2022 lists holdings in non-resident companies among the assets to be reported (art. 7, I) and treats as Brazilian capital abroad the assets transferred to a fiduciary agent abroad in favor of resident beneficiaries (art. 7, § 2). The annual declaration is mandatory from USD 1,000,000.00 on December 31 (art. 10), between February 15 and April 5 (art. 13).

In the US:

• •Form 5472: a disregarded US entity with a single foreign owner is treated as a separate entity for the duty to report transactions with related parties. The penalty for failing to file the form is USD 25,000 (Form 5472 instructions). Confirm with a US accountant whether your LLC is covered, especially when the owner is a trust.
• •BOI (FinCEN): according to the FinCEN page updated on August 11, 2026, companies formed in the US are exempt from beneficial ownership reporting.

The topic of automatic exchange of information between countries is in our guide on the CRS.

What should you check before setting up an LLC inside a trust?

1. •Map debts and lawsuits. List liabilities, pending actions and guarantees. This is the point that decides the risk of fraud against creditors and on enforcement.
2. •Define the purpose. Succession, estate organization and management are purposes you can document. Hiding assets from a creditor is not.
3. •Calculate the tax. Check whether the LLC will have passive income (December 31) or active income (when made available) and evaluate the art. 8 option.
4. •Define who controls. If the settlor keeps powers over the trust and the LLC, treat the assets as the settlor's for tax purposes, as art. 10 says.
5. •Plan the reporting routine. The DAA, the CBE and, where applicable, the US forms go on the calendar from the first year.
6. •Hire professionals on both sides. A Brazilian lawyer or accountant and another from the jurisdiction of the LLC and the trust.

Our team works on corporate structures, succession planning and compliance. To compare the US LLC options, also read LLC in Wyoming or Delaware.