First, they do make helmets for toddlers, and you should use one no matter which option you choose.
Secondly, I recommend the trailer if at all possible. When I was searching, it was what I was told was best and safest. My son loves it (he's almost 3 now). It's very stable, and even if you fell, the trailer is unlikely to tip. My concern with the seat is if you fell, your child falls too, and even with a helmet, there can still be injuries. Plus, the addition of the extra weight does change your balance.
That being said, it would be easier not to pull a trailer if you're in an urban environment where you would be on a lot of busy roads. And another downside is the extra drag on you peddling. It does give you a good workout, however!
There are many types of trailers, and many of them do fold up, so transport may not be as bad as you think. Check them out at a store and see what you think.