Trusts and Family-Run Government Contractor Companies

It’s a common tactic for families to utilize trusts to both own, control, and transfer ownership of family businesses. Among other reasons, these trusts help to achieve goals related to asset protection, tax savings, and estate planning. 


If your family-run business is also a government contractor, it is critical that you be aware of the Federal Acquisition Regulation. Not complying with this body of law could result in various complications include allegations of making false statements, losing applicable clearance, and having bids and proposals rejected.


The Role of CAGE Codes


Under these regulations, government contractors must disclose Commercial and Government Entity (CAGE) codes as well as the associated codes for the contractor’s immediate owner and highest level owner. In case you’ve forgotten, a CAGE Code is a unique identifier that is assigned to suppliers of various government agencies.


An immediate owner is defined as an entity that has direct control of the offeror, while a highest level owner refers to the party that controls the immediate owner. Additionally, under these regulations, both highest level owners and immediate owners must obtain these codes even if the parties are not directly contracting with the government.


How Trusts Are Impacted by CAGE Codes


In situations where an offeror is directly owned by another entity, the entity is classified as the immediate owner of the offeror. In situations where an offeror’s immediate owners are in turn owned by another entity, the entity at the top of this chain is classified as the highest level owner. While regulations do not define who constitutes an entity, recent commentary by the Defense Logistics Agency states that trusts are classified as entities under the regulations and should be provided with their own CAGE codes.


New York law dictates how trusts are controlled and operated in the trust. While not all trusts are required to be registered with the secretary of state, trusts often share similar traits to other business structures. These traits include the ability to buy and sell personal property, to own equity in other businesses, and to enter into contracts.


The Challenges Presented by Trusts for Government Contractors


In addition to making sure that a trust is provided with its own CAGE code, utilizing trusts also present several other challenges for government contractors. One of the most substantial of these challenges is that rival contractors often attempt to argue over the award of jobs to trusts by claiming the trust does not meet the necessary regulations. 


To make sure that your trust does not fall susceptible to such an argument, it is a wise idea to retain the assistance of a skilled attorney who can help you create the trust.


Contact an Experienced Estate Planning Lawyer


If you are interested in utilizing a trust to control a family-run government contractor business, it is vital to make sure that you follow the applicable regulations. To make sure that your trust meets these standards, you should not hesitate to speak with an experienced estate planning lawyer. 

Contact Ettinger Estate Planning today to schedule a free case evaluation.

Contact Information