[Albuport]

I'm thinking of starting a company with two other partners so that we can own various interests in established companies. We don't want to own any of these interests personally. Is a holding company the best way to own?

AJ

[ArcSine]

The holding company route is a pretty typical way of arranging the ownership structure, although it's more common in private equity situations where the ownership of each portfolio company represents a controlling, or at least significant, ownership percentage. The purpose of setting up the holding entity in such a case is to insert an additional layer of liability protection between the partners and the operating assets.

If you and your partners are contemplating the ownership of majority or controlling interests, then the liability-firewall motivation I just mentioned will be important. Be aware, though, that if you end up making any personal guarantees of investee company debt, you've blown some serious holes in that firewall.

On the other hand, if you're just going to be owning small pieces of the portfolio companies--such that you're in effect a 'mutual fund club'--then having HoldCo will be less important WRT the liability issue. Nevertheless, a lot of 'investment clubs' do establish HoldCo entities in order to simplify (through the consolidation of) the accounting, administrative, and tax paperwork. So you might still want to consider forming HoldCo, in this scenario.

DEFINITELY have a pow-wow with your tax guru. Depending on what kind of business model you're contemplating, there are a number of variables that need to be decided upon (e.g. C corp, S corp, LLC), all of which having different tax consequences. Best of luck in the new venture!