Asset Protection and Holding Companies
Top Reasons for Asset Protection through a U.S. based Holding Company.
When you hear of a new tax plan or the financial pundits are talking about an investment concept that you have haven't discovered, you can be confident that it exists for at least one of these two reasons:
1. Tax minimization
2. Limit of Owner's Liability
Wealth managers frequently advocate the use of a holding company as an asset protection strategy for their affluent clients. The holding company serves as an investment tool that is useful in lowering taxes, allows the easy transfer of assets, and creates a layer of personal asset protection for the property, and wealth, of its owners.
For wealthy families, these holding company arrangements are useful for massaging the effects of the estate tax when they die. Holding companies also make it much easier for the family to declare distributions on their LLC assets. An added advantage of using a holding company is that it is a creature of contract so the terms can be modified.
As for liability protection, a holding company does not offer any protection when it only holds publicly traded stocks. Basically, a holding company protects its owners from personal liability. But it does not automatically protect the other assets within the holding company unless they are each separately wrapped up in a limited liability holding structure of their own.
The last advantage of a holding company is that you can issue new shares and borrow against the assets in a holding company. What we see most? Our customers use asset holding companies for their Intellectual property such as trademarks and patents, books, screenplays, and music royalties, rental and investment property holdings, and various passive income streams and joint venture deals.