Perpetual Purpose Trusts and Their Application for Business Succession Planning
Across the United States, an unprecedented wave of business succession is underway. As baby boomer entrepreneurs retire—a phenomenon often referred to as the “silver tsunami”—millions of small and mid-sized businesses are confronting the challenge of ownership transition. For founders and business owners whose companies are anchored in a social mission, long-term stakeholder relationships, or community presence, conventional exit options often fall short. A sale to private equity or a larger competitor may maximize short-term value, but at the cost of longterm independence and purpose. Employee buyouts, family transfers, and charitable conversions each carry promise but may face limitations in scalability or applicability. Against this backdrop, a new model of enterprise ownership is emerging: the Perpetual Purpose Trust (PPT). Unlike traditional ownership structures that may concentrate control among a limited few, with financial incentives being the driving target, PPTs offer an alternative that targets multiple objectives—optimizing profitability while maintaining a mission-oriented approach to business succession planning.
This article provides an overview of PPTs, including the underlying legal framework, applicable income and transfer tax considerations, and common structuring alternatives, considering various factual scenarios but focusing on PPT structures designed to facilitate business succession plans, particularly in response to succession challenges faced by mission-driven business owners. Through the adaptation of common trust structures, the PPT model provides an alternative to traditional business succession planning, offering a unique governance architecture that facilitates long-term and independent stewardship of a company’s business enterprise and stated mission.
