California Holding Company Structures Guide

It depends on your situation. A holding company structure makes sense when you have significant assets to protect, multiple business ventures, or complex estate planning needs. The California $800 minimum franchise tax per entity adds up quickly, so you need enough at stake to justify the cost. Generally, if you have over $500K in assets or multiple properties/businesses, the protection benefits can outweigh the administrative costs. For a single small business with modest assets, the complexity may not be justified.

You can, but there are important considerations. Transferring real estate triggers reassessment for property tax purposes unless an exclusion applies. Transferring mortgaged property may trigger due-on-sale clauses. Existing insurance policies may not cover newly-transferred assets. And critically, if you transfer assets after a claim has arisen or is anticipated, the transfer can be voided as a fraudulent transfer. Asset protection planning must be done proactively, not reactively.

Yes. Maintaining separate bank accounts is essential for preserving the liability protection of each entity. Commingling funds—mixing money between entities or with personal accounts—is one of the primary reasons courts "pierce the corporate veil" and hold owners personally liable. Each entity should have its own bank account, and all transactions should be properly documented between entities with appropriate intercompany agreements.

For most California-based small businesses, forming in California is simpler and often better. If you form in Delaware but operate in California, you'll need to qualify as a foreign entity in California anyway, paying both states' fees. Delaware offers advantages for venture-backed startups expecting investor participation, companies planning to go public, or sophisticated structures with out-of-state assets. For a straightforward holding company owning California real estate or operating businesses, California formation is usually sufficient.

There's no one-size-fits-all answer. The most protective approach is one LLC per property, but that can be expensive with California's $800 minimum tax per entity. A common middle-ground is grouping properties by type (residential vs commercial), by location, or by equity/value thresholds. For example, you might put each property worth over $300K in its own LLC while grouping smaller properties together. The goal is balancing protection against administrative cost—work with an attorney to find the right structure for your portfolio.

A Series LLC is a special type of LLC that allows creation of separate "series" within a single LLC, each with its own assets and liabilities. It can provide similar liability isolation as separate LLCs but with only one filing fee. However, California does not recognize Series LLCs formed under its own law—you'd have to form in a state that does (like Delaware) and then qualify in California. The California FTB's position is that each series is a separate entity for tax purposes, potentially owing its own $800 minimum tax. Given this uncertainty, traditional holding structures are often clearer in California.

Yes, significantly. A family holding company (often an LLC or Limited Partnership) allows parents to gift or sell minority interests to children at potentially discounted values, transfer wealth while maintaining control, and simplify succession planning. The entity structure makes it easier to transfer fractional interests than dividing physical assets. However, the IRS scrutinizes family LLCs closely, and the valuation discounts have been challenged in recent regulations. Work with an estate planning attorney to ensure your structure achieves its goals while complying with tax rules.

Yes, your insurance should be restructured to match your entity structure. Each operating entity typically needs its own general liability policy. Property insurance should name the entity that actually owns the property. You may need umbrella policies that cover multiple entities. D&O insurance may be needed for corporate holding companies. Review all policies with your insurance agent after restructuring—coverage gaps are common when assets move between entities without corresponding policy updates.