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Family Office Management Company

A family that has accumulated significant wealth can create an office that contracts with relatives and family businesses to provide financial services, keeping wealth management expenditures within the family.

Commonly referred to as family office.

Do I Qualify for the Family Office Management Company?

By establishing a family office management company, you can hire your relatives to provide wealth management services to existing family businesses, allowing you to pay your family members for these services rather than an outside agency and deduct certain investment management expenses.

2022 Family Office Management Company Details

A family that has accumulated significant wealth may benefit from creating a family office management company to provide management and financial advisory services to family holding companies and operating businesses, as well as individual family members.

How Does a Family Office Management Company Work?

With a family office management company, your family runs a management and financial advisory service company that can generate income from management contracts with your other family businesses. The revenue can be converted into salaries, benefits and business expenses for family members in varying tax brackets. In other words, some of the fees that your family might normally pay to outside advisors can instead be paid to a family subsidiary that may hire family members who earn salaries in exchange for managing family business interests. This can include implementing additional strategies in tandem with the family office management company, such as hiring children and medical reimbursements.

In addition, the management company may qualify to deduct some investment management expenses that individual family members could not deduct on their personal returns.

A legitimate family-owned management company takes a lot of work. To qualify for the tax benefits of this strategy, the company must be set up for the purpose of making a profit. It should have a full-time staff that receives salaries and benefits. That staff can include family members, but they must actively participate in the business.

Family Office Management Company

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• Can hire family members, keeping wealth management expenses in the family
• May qualify to deduct some investment management expenses
• Additional wealth planning benefits including shifting wealth to children
• Can benefit from additional tax savings from other tax strategies


• Involves setting up and running a new business, which requires a lot of work
• Additional paperwork and tax returns required with new business entity

Assumptions When Taking the Family Office Management Company

• You have a spouse who is not an owner of another business in the family.
• You are willing to create a separate business entity, either as a Schedule C or C corporation.

Conflicting Strategies

• Hiring Children
• Qualified Educational Assistance Program
• Medical Reimbursement Plan

Requirements to Claim the Family Office Management Company

• The family office management company must be a separate business entity carrying on operations in a continuous and businesslike manner for the purpose of earning a profit.
• Expenses must be allocated appropriately to the management company.
• The family office management company must receive income from other businesses in exchange for the services it provides.

Business Entities That Can Claim the Family Office Management Company

• Schedule C
• Schedule F
• S Corporation
• C Corporation

The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.

Prosperity Tax Advisors
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