I’m talking about businesses that deal with physical goods. Looking into whether it’s beneficial to set up a separate company for your trademarks and intellectual property, then lease them to the main business. Anyone have experience with this?
Just a reminder, this forum is for asking questions about starting and managing small businesses. If your post goes against the forum’s rules, it might get removed. A temporary or permanent ban could also be issued if rules aren’t followed.
This is an automated message. If you have any questions or concerns, please reach out to the moderators.
One reason people separate companies like this is to protect their assets. If someone sues the main company for something, the assets of the main business can be protected by keeping them separate. The insurance will cover any payouts since the main business has no assets or cash.
@Auden
Is there a specific name for this type of business structure where the IP is leased out? And is it difficult to set up?
Piper said:
@Auden
Is there a specific name for this type of business structure where the IP is leased out? And is it difficult to set up?
If you go this route, it’s best to hire a lawyer who specializes in setting up companies. If you mess this up, it could really hurt you. I’m not sure if there’s a specific industry term for it.
Piper said:
@Auden
Is there a specific name for this type of business structure where the IP is leased out? And is it difficult to set up?
What you’re talking about is a holding company. Many companies, both public and private, are set up this way. The benefits depend on how the corporation is structured. I’d recommend speaking to a lawyer who knows a lot about tax laws for advice. But be aware, this isn’t cheap, and it’s only worth it if your business is substantial. There’s even a movie from the 90s, with Tom Cruise as a lawyer, that touches on this topic.
This kind of setup is typically done for liability protection, as others mentioned. For tax reasons, one company might hold the IP in a different (lower-tax) jurisdiction and get the lease payments to shift income there.
If you’re asking about this, it’s probably not worth it for your business right now. The costs would likely be higher than any potential savings you could get from avoiding a lawsuit.
Flynn said:
If you’re asking about this, it’s probably not worth it for your business right now. The costs would likely be higher than any potential savings you could get from avoiding a lawsuit.
This is usually done to avoid taxes.
Flynn said:
@Ellis
If you’re asking about this, you probably don’t have enough money to make it worthwhile.
If you say so. Clearly, you’ve figured everything out in the 15 seconds since you learned about this kind of business structure.
Flynn said:
@Ellis
What makes you think your comment was the first time I’ve heard of tax avoidance strategies?
I’m sure you’ve heard of tax avoidance before, but your first comment clearly showed you didn’t know about this specific structure. It’s called the ‘Double Irish’, by the way. You should check it out, it’s a popular method used in the tech industry.
@Ellis
Your reading comprehension is poor, but who cares? You really need to improve your attitude if you want to talk down to others. Come back when you have more experience.
There can be tax benefits, depending on how it’s set up and where the companies are located. Whether the cost of managing multiple companies to avoid looking like you’re dodging taxes is worth it is something a tax advisor can help you with.
Setting up a separate company for your trademarks and IP can help with taxes and protect your assets. It also gives you more flexibility if you decide to sell or license the IP. But it can be complicated, so it’s best to talk to a legal or tax expert to make sure it’s the right decision for your business.