Legal Structuring and Entity Selection

How to construct the legal framework of a family office to isolate risk, manage taxes, and ensure smooth succession.

Separating OpCo from HoldCo

A fundamental mistake is mixing the management entity (OpCo) with the asset-holding entities (HoldCo). The OpCo should hold no assets, only operating contracts and employee agreements, shielding the family's capital from employment litigation or vendor disputes. The OpCo charges the HoldCo a management fee, usually modeled to break even.

Private Trust Companies (PTCs)

For ultra-high-net-worth families (typically $500M+), a PTC provides the ultimate control over trustee decisions without relying on institutional banks. South Dakota and Wyoming are currently the premier jurisdictions for PTCs due to their favorable trust laws and lack of state income tax.

The SEC Family Office Rule

In the US, an SFO must structure itself to fall under the SEC Family Office Exemption (Rule 202(a)(11)(G)-1) to avoid registering as an investment adviser. This strictly limits who the office can advise (no non-family clients). Use our exemption diagnostic tool to verify.

Common Mistakes

Holding real estate in the same LLC as the operating company or liquid portfolio. A slip-and-fall lawsuit at a commercial property can expose the entire family's stock portfolio if not siloed into distinct Series LLCs.

FAQ