Florida Broker Practice Exam

Which type of business entity is formed by individuals making an investment to engage in transactions involving the entity's own real property?

1. Business trust

2. Trade association

3. Limited Liability Company

4. Fictitious name

The correct answer is: Business trust

A business trust is a specific type of business entity formed when individuals invest in the trust to engage in transactions related to the entity's own real property. In a business trust, the property is held in trust for the benefit of the beneficiaries or investors, allowing for a pooling of resources and collaborative management of the real estate investments. This structure provides a way for multiple investors to participate in real estate transactions without directly holding title to the property, as the trust itself becomes the legal owner. In contrast, a trade association typically consists of individuals or companies within the same industry, focusing on promoting common interests rather than investing in property. A limited liability company (LLC) also involves managing real estate investments but operates under different legal principles and structures, emphasizing limited liability protection for its members rather than the trust arrangement. A fictitious name, or "doing business as" name, is merely a registered name under which a person or entity conducts business and does not represent a separate legal entity. Thus, the unique characteristics of a business trust make it the correct answer, as it directly relates to enabling the investment and management of real property by a group of individuals.