Upon my searches of the interwebs for which way I should structure my business I came across the holding company and operating company strategy or method, whatever.

I suppose I should state my business intent to keep in mind while reading, I have been planning to start a lawn care (and more) business, as long as my tax return pans out and I can get a commercial lawn mower for the spring. I also want to do fertilizer, and everything, the works. Tree care and pesticide (I'm certified) and then move into winter operations if I get enough income to work with. Currently I just got a job as a handyman, so I think am actually going to start the business that way this winter. Here in the next month or so I'd like to get my business license and check out insurance.

And back to the tax structure. My understanding of this holding company stuff is that the corporation, let's say C Corp., owns the equipment, and the operating LLC's or DBA's underneath it, while the LLC's or DBA's use the equipment. That way if something goes wrong, there becomes an issue of what how to go after the contractor. I don't know what happens, but It would seemingly complicate the process on the other side, thus adding a layer of insulation on the contractor's side.

This also seems shady to a degree. Smart, but shady, and I am wondering if it is completely groovy, or is it frowned upon by anyone? Something to keep on the down low or Ok to share in casual conversation.

What I am thinking is setting up C corp, then opening C Maintenance LLC, C Lawn LLC, C Snow LLC, that way the different aspects and fields of work are kind of separate... I don't know, now that I am saying it sounds stupid because that's just that much more in business license fees. Is there any advatange to doing this? Or would a holding company and a single operating company apply at all?


I put this under LLC because unless I get some answers I am probably going to just go LLC to start with and then see if I can complicate things later. As I read about this stuff, the reason I am interested in going corporation is because of the tax benefits at a certain point. I just know how hard it is for new business to get off the ground, and I figure if I can make the best decision regarding taxes, then that would ensure my business' success....

Anyway, thanks for any feedback. Also, with what I have asked, unless you can answer everything completely, would you be able to recommend what kind of professional service I should be seeking for consultation in this matter and what kind of price range I might expect to see....?Or any websites or book suggestions, I like to read.

as a final note, the only other thing I can think to do is do this in stages. I haven't got the numbers fresh in my head, but I think corporations taxes are higher. So at first while the business is starting, go LLC, then as I get income and everything starts coming together, restructure at the best point in time to take advantage of any tax tricks or something.

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What I am thinking is setting up C corp, then opening C Maintenance LLC, C Lawn LLC, C Snow LLC, that way the different aspects and fields of work are kind of separate... I don't know, now that I am saying it sounds stupid because that's just that much more in business license fees. Is there any advatange to doing this? Or would a holding company and a single operating company apply at all?

QUOTE]

Using holding / operating companies is an asset protection planning strategy helping to limit liability risks in your biz structure. An ideal biz structure consists of an operating entity that does not own any vulnerable assets and a holding entity that actually owns the biz's assets. With this structure, the small biz owner can eliminate (or, at the very least, substantially limit) liability for both biz debts and personal debts. TheLLCs and reg C corp emerge as the two best choices of all the types of organizational forms available to the small biz owner, in terms of asset protection planning and limiting liability in your biz structure to avoid losing your personal assets if your biz runs into financial difficulties. In most cases, the LLC will be superior to the corp for the small biz owner ;However, even when the biz is formed as an LLC or a C corp,you , as the business owner still face an asset protection dilemma. Although operating your biz as an LLC or a C corp protects your personal assets from the reach of biz creditors, your biz assets are still vulnerable to those creditors. The biz can still lose everything that it has which can spell ruin for a small biz owner. Often it seems that protecting your assets against the claims of personal creditors and against the claims of biz creditors are competing interests. Assets placed within your biz forms are vulnerable to the bizs? creditors, but protected, to some extent anyway, from the owner's personal creditors. However, assets kept outside of the biz form are vulnerable to your personal creditors, but protected from the bizs's creditors. protecting all your assets from both business and personal creditors can be accomplished simultaneously through the proper funding and structuring of the yur biz.The ideal biz structure ; an operating entity that has possession of the assets, but does not own the assets unless they are encumbered in favor of the holding entity or owner, and a holding entity that actually owns the business's assets.
It's true that this multiple entity approach takes planning and expert advice. And, once you adopt the multiple-entity approach, you'll need to balance the funding of these entities through both equity and debt, using leases, loans and liens.