Structuring a Family Office for Tax Benefits

Structuring a family office for tax benefits is a key consideration in setting up a family office. 

Consider these points in structuring your family business for tax purposes.

Because the family office is a separate legal entity, one can move additional costs from the family members to the family office.

Investment analysis expenses can be tax deductible under Section 162 of the US tax code.

The case of Lender Management set forth the following criteria for deducting investment management work as expenses in the family business.

The family business conducts its activities with regularity and continuity.

The ownership and control of the family business is not the same as the family holding companies.

The family members can fire or replace the family office or change its services.

The family office engages service providers who may or may not be family members.

The family office is compensated separately from its normal return on its assets.

The family office has an obligation to provide those services and does so.

The tax advantage comes from shifting the costs of investment work from the individual family member to the family office entity which can deduct those fees from the revenue generated.

 

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