Starting or creating a family office
How Should Ownership of the Office Be Separated From Ownership of Family Assets?
Short answer. Keep the office's operating entity separate from the family's asset-owning entities. Define the office's authority for each entity, maintain distinct accounts and expense records, and ask counsel to review the legal and tax design for the family's circumstances.
Keep the office's operating organization distinct from entities that own family investments, businesses, real estate, or other assets. The office may provide services to those entities, but records should show which entity owns each asset, pays each expense, and controls each decision.
Map Entities and Responsibilities
Work with the family's attorney and CPA to prepare an organization chart and asset map. Identify the office's operating entity, asset-holding entities, and any trusts, foundations, or businesses that interact with the office. For each entity, record its purpose, owners or governing parties, decision authority, bank accounts, and administration leads. Legal and tax details vary, so discuss the proposed structure with qualified advisers before implementation.
Document the services the office provides to each entity. The office might coordinate reporting, bookkeeping, bill payment, or other administrative work. Define who can authorize those activities and who remains responsible for the underlying assets. Written service agreements or internal policies can specify scope and fees or cost allocation. They can also describe reporting and approval requirements.
Keep Money and Records Distinct
Use separate accounts and accounting records for the operating entity and each asset-owning entity. Record transactions in the entity that incurred the expense or received the benefit. If the office pays a bill for an asset-owning entity, retain the invoice and payment record, plus documentation of how the payment was authorized and recorded. Do not treat family assets as an informal pool for office expenses.
Set controls for transfers between entities and reimbursements. For shared services, define who can request and approve a transfer, what support is required, and how the transaction will be reconciled. Regular review can catch misclassified expenses or incomplete records while they are easier to correct. Keep clear records for the office's service contracts and invoices, and document related approvals.
Set Boundaries for Authority and Risk
Limit staff actions to the authority granted to them. An employee who prepares a payment or report should not automatically have authority to commit an asset-owning entity to a transaction. Assign signing authority and approval limits in writing. Consider how independent review, dual authorization, or documented conflict procedures fit the size of the operation.
Ownership and operating structures can affect control and liability. They also raise questions about formalities, costs, or tax. A qualified attorney and CPA can advise on how those considerations apply to the family's entities and jurisdiction. The single family office fundamentals page offers a starting point for planning. You may also want to review coordination with trusts and family entities, safeguards for separating assets, and internal controls.
Review the Design Over Time
Revisit the map and service arrangements when entities are added, assets are transferred, or office responsibilities change. Keep a current record of ownership and authority, along with the locations of supporting documents. Separation is useful only when the family's daily procedures and records uphold it.
Legal structures are set up properly for real estate holdings, operating businesses, investments, etc.
Sources: How to Start a Family Office, The Single Family Office. Informational only, not financial, legal or tax advice.