Do you have a holding company?

Like many entrepruneurs, I operate multiple businesses under separate entities. They're all LLC/S-corps, and someone suggested that I form a holding company for additional liability protection and ease of management.

Have you considered a holding company? Do you operate one? Has it been worth the additional paperwork?

I doubt this makes any sense at all for you or other people in similar situations. You should check with someone who knows more than I do, but S corps can't be owned by non-person entities (so you'd have to elect C corp status for all of them)

I don't see how a holding company helps with liability protection. Either the entities provide it or they do not. If they do, no problem, if they do not, then the shareholder (you or the holding company) is now liable. I guess there is then one small level of additional protection for you personally, but it seems like a real hassle to do that since that risk can be avoided just by operating your entities correctly.

I have one, at the suggestion of my accountant. It's not for liability purposes, but tax planning purposes. Oddly, I wrote about this on my blog last week (sorry for the self promotion). Your best bet is to call your accountant and ask about it in regard to your personal situation.

Holding companies are usually set up for tax purposes. Consulting with a good tax cpa for your individual situation is best as it gets complex.

Having errors and omissions insurance coverage also helps with protecting your company from claims if your client holds you responsible for errors, or the failure of your work to perform as promised in your contract.

I have considered a holding company and do "sort of" have one for one of my ventures but it seems to me not worth it for small businesses.

To benefit from the increased liability protection, you still have to have separate entities for what the holding company owns. If you don't, then they are just divisions or product lines of the holding company.

So for me, the paperwork was just too much and the protection not enough to justify having to do the books for the holding company and the separate entities that it owns.

One thing to think about is a Nevada LLC. That is the only state that I know of where you can carve out separate, independent "companies", within a single LLC. It's complex and I don't fully understand how it's done but it's possible.

I take it the question is directed at the United States of America... I can't say much as my own experience with my own holding company is from a different legal jurisdiction.

One important thing that I have not seen mentioned though: Depending on ownership structures and tax law, using a holding company may allow you to transfer money from one subsidiary company to another without being taxed during transfer.