Holding company vs operating company
Why families often separate ownership (holdco) from day-to-day business risk (opco) — and how that maps to Elephant's entity registry.
Key facts
- A holding company owns assets or subsidiaries; an operating company runs the business that generates revenue and liability.
- Separating holdco and opco can isolate lawsuit and creditor risk from long-term family assets — structure and insurance still matter.
- Estate plans often place membership interests (not raw operating assets) into trusts for cleaner succession.
The simple picture
An operating company employs people, signs customer contracts, and takes on day-to-day risk. A holding company sits above it (or beside rental/investment assets) and owns equity, IP, or real estate. When something goes wrong at the operating level, the goal is that the family's other assets are not automatically on the table.
Courts can still pierce limited liability if you ignore formalities, commingle funds, or undercapitalize the business. A diagram on a whiteboard is not a substitute for clean books, separate bank accounts, and counsel-reviewed agreements.
How this shows up in a family office
Many families use one or more LLCs as holdcos for real estate or investments, while a separate entity runs an active business. Membership interests in those LLCs can later be gifted or assigned into a revocable or irrevocable trust as part of the estate plan.
In Elephant, register each entity, track ownership percentages, and link assets titled to the entity so the inventory matches the legal structure.
References
This guide is educational only and is not legal, tax, or investment advice. Laws vary by state and change over time; confirm current figures with the linked primary sources or a licensed professional in your state.
Related guides
LLC vs C-Corp vs S-Corp
When a family holding company should be an LLC, and when a startup should be a Delaware C-Corp — without pretending this is tax advice.
Funding your entity
Formation papers do not move assets by themselves — how to title property, assign interests, and keep the inventory honest.
Entity formation checklist
The practical sequence from name clearance through bank account — the same steps Elephant tracks in the entity checklist.
Home state vs Delaware incorporation
When forming in Delaware actually helps — and when a solo founder in Georgia (or any home state) is better off incorporating locally.
Put it into practice
Elephant turns these documents into a guided, state-aware workflow — drafted, executed, and stored in one encrypted vault.
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