Entity choices for a new single family office
Built on Chapter 6 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
A billionaire family should be able to explain which entity owns an asset, which entity employs the team, and which entity is responsible for an obligation. The choice of legal form belongs inside that broader map. A familiar entity name does not by itself establish that the family's activities are properly organized.
Chapter 6 asks families to examine their existing structures and get legal input before building the office. I would start with the work and exposures the structure must handle, then ask qualified advisors to evaluate the available forms for the actual jurisdictions and facts.
Map the existing position first
List the operating businesses, investment vehicles, trusts, and personally held assets. Identify the owner and the person authorized to act for each. Include accounts and significant contracts so the map can be checked against records.
Some functions may already sit inside the operating company. Find out who employs the people performing them and how expenses are allocated. The family may need a different service arrangement after a business sale or ownership change.
Keep the family relationship map separate from the legal ownership map. A person may be a beneficiary without owning an entity directly, and a family representative may lack signing authority over a particular account.
Define the job of the office entity
Decide what the management organization will actually do. It may employ staff, coordinate providers, maintain records, and administer services. Its purpose should be clear before advisors determine how it relates to the asset-owning entities.
Explain who pays its costs and how shared expenses will be handled. Different households or entities may use different services. The appropriate professionals should evaluate the proposed arrangements and documentation.
Do not assume the office should own everything it oversees. Management responsibility and ownership can be separate. Ask advisors to explain the consequences of the proposed relationship and the work required to maintain it.
Examine exposure at the contract level
Review which party will sign employment agreements, service contracts, and investment documents. Identify guarantees and other obligations that connect entities. A structure on a diagram can be undermined by the contracts people actually sign.
For founders assessing a proposed entity structure, I tell attendees to do full diligence even when someone claims a relationship with us. The same discipline applies to a proposed structure. A recommendation from a familiar advisor still needs a clear explanation of the assumptions and intended result.
Ask who will check a document before signature and confirm the correct entity. Employees should know when a proposal requires legal review instead of choosing an entity from memory.
Consider the people and locations involved
Where family members live, where work is performed, and where assets are held can affect the questions advisors need to examine. Provide the actual facts early. An incomplete description can produce advice that does not fit the office's activities.
Keep the discussion specific to the proposed services and participants. If the family plans to involve outside investors or additional families, identify that plan before implementing a structure built for a different scope.
Avoid using this process to chase a claimed universal answer about the best location or entity. Ask advisors to compare the options against the family's objectives and explain the conditions attached to their recommendation.
Budget for maintenance
Every additional entity creates records and responsibilities. Assign someone to maintain the ownership schedule, signing authorities, and filing calendar. The office needs to know what recurring work the chosen structure creates.
Set a controlled place for formation documents and approved changes. Reporting should reconcile the structure to the accounts and obligations the office administers. When an asset is transferred, update the related records through the appropriate process.
What to take from this
- Map current ownership and authority before choosing new forms.
- Define what the management entity will do and who will pay.
- Review contracts and guarantees alongside the structure diagram.
- Assign responsibility for maintaining the resulting records.
Ask counsel to walk the team through a proposed investment from approval to signature and payment. Confirm the entity at each step before opening accounts or signing service agreements.
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.
Questions and answers
Is there one best entity for every family office? No. Advisors need the actual activities, ownership, locations, and objectives before comparing options.
Should the office entity hold every family asset? That is a question for the structure review. Oversight does not require assuming that every asset has the same owner.
What records should staff be able to find? The current entity map, governing documents, authorized signers, relevant contracts, and the calendar of maintenance responsibilities.