Holdco best practices?

February 23, 2024

by a searcher from Texas A&M University in Surprise, AZ, USA

Instead of direct ownership, I’ve seen others use holding companies to provide board strategy to CEOs of owned companies, legal support, and employee benefits to the owned companies under a single plan. What is your preferred business structure when acquiring and why does it work for you?

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Reply by a professional
from University of Miami in New York, NY, USA

Peter - hate to say it, but “it depends.” Specifically, on where the op co is located, and where you want to establish a hold co. I would use Nevada, Wyoming, South Dakota, or Delaware (see a pattern?) for the hold co, especially if it’s providing certain management services. There is a viable tax play in that, and it can juice your returns *if it’s done properly*.

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Reply by a professional
from Villanova University in West Chester, PA, USA

^redacted‌ we work with a number of clients to set up holdco’s for many of the reasons you listed above. It’s a structure where the owner intends to have more than one subsidiary and can provide centralized back end support to multiple businesses or can be used as a portfolio holding company to hold their investments. There’s a cost benefit analysis - a greater cost to have more entities but can provide benefits in terms of operational efficiencies and/or protection from liability. There are also newer entity types such as the series LLC to accomplish this in a more streamlined manner. The specifics of the corporate structure, domiciles and entity selection depends on the specifics of an owners short term and long term goals, as well as deal specifics. I’d be happy to discuss this further.

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