Should your brand live in its own company?

Sometimes. Done right, it keeps your most valuable asset away from your riskiest company. Done casually, it's a tax position you can't defend.

How it works

One company owns the trademark, software, or other IP. It licenses the IP to the operating company for a royalty. If the operating company is sued or fails, the IP sits in a separate entity.

What makes it hold up

• Real ownership. The IP is properly assigned to the holding company, and registrations are in its name.

• A written license. Terms, scope, and a royalty you could defend as market rate.

• Actual payments. The royalty gets paid and recorded on both sides.

• Separate books. Commingling undoes the separation.

The tax side

Royalties are deductible to the payer and income to the holder. Between related companies, the IRS and many states expect market-rate pricing. Several states add intercompany royalties back to taxable income, which can erase the expected savings.

Offshore

Moving IP to a foreign company draws more scrutiny: transfer pricing rules, anti-deferral rules that can tax a US owner on foreign income currently, information returns with steep penalties, and rules that can tax the transfer itself as if you sold the IP. Not impossible. Not a do-it-yourself project either. If you're not a US person, the questions run the other way.

When it's worth it

When the IP is genuinely valuable, the operating business carries real liability, and you'll keep up the formalities. For a small business with one brand and modest risk, a holding company may cost more than it protects.

What to do

List what you own: trademarks, domains, software, content. Then decide whether separation is worth the upkeep. An entity structure audit covers whether your current setup holds up.

This is general information, not legal advice for your situation. If you want an answer for your business, book a consultation.