How to Structure a Family Office - Complete Guide for 2026
"They were all trying to charge me 0.5-1.25% AUM... That was like $150K-$375K a year. I couldn't fathom paying my FA about one Lamborghini a year for their service."
— Tech executive with $120M+ portfolio, on why he chose a flat-fee advisor over a full-service family office
This quote from Reddit's r/fatFIRE captures a question every wealthy family faces: how do you structure wealth management without overpaying for it?
How you structure your family office determines its effectiveness. Get it right, and operations run smoothly. Get it wrong, and you'll face constant friction—or pay Lamborghini money for lackluster returns.
This guide covers everything from legal entity choice to organizational design, with real examples from people who've built family offices themselves.
Legal Structure Options
Your family office needs a legal home. Several entity types work well.
Limited Liability Company (LLC)
The most popular choice for family offices. LLCs offer:
- Liability protection for family members
- Pass-through taxation (no double taxation)
- Flexible management structure
- Privacy (members not publicly disclosed)
LLCs can be member-managed or manager-managed, giving you control over governance.
Limited Partnership (LP)
Common for family offices with investment focus. Benefits include:
- Clear separation between general and limited partners
- Liability protection for limited partners
- Tax efficiency for investment activities
- Familiar structure for investment managers
The general partner manages; limited partners provide capital.
Corporation (S-Corp or C-Corp)
Less common but useful in specific situations:
- S-Corp: Pass-through taxation, but restrictions on ownership
- C-Corp: More complex, potential double taxation, but unlimited growth
Corporations work well when the family office employs many people or plans to eventually sell services externally.
Private Trust Company (PTC)
For families with significant trust assets, a PTC allows family control over trusts.
- Consolidates trustee functions
- Keeps trust administration within the family
- Provides succession continuity
- Requires more regulatory compliance
PTCs are most common in trust-friendly jurisdictions like South Dakota, Nevada, or Delaware.
Choosing Your Domicile
Where you establish your family office matters for taxes, privacy, and legal protections.
U.S. Considerations
Delaware: Favorable business laws, privacy protections, Court of Chancery expertise.
Nevada: No state income tax, strong asset protection, privacy laws.
South Dakota: Premier trust jurisdiction, no state income tax, dynasty trusts.
Wyoming: Low costs, strong privacy, favorable LLC laws.
International Options
Some families establish offshore structures for:
- Tax planning (legally)
- Asset protection
- Privacy
- Multi-jurisdictional coordination
Common jurisdictions include Cayman Islands, British Virgin Islands, Singapore, and Switzerland.
Work with international tax counsel before establishing offshore structures.
Governance Structure
Legal structure is just the beginning. Governance determines how decisions get made.
Family Council
The highest governing body. Typically includes:
- Senior family members
- Sometimes next-generation representatives
- Meets quarterly or semi-annually
Responsibilities:
- Setting overall direction
- Major financial decisions
- Family policy changes
- Approving budgets
Board of Directors/Managers
Oversees family office operations. May include:
- Family representatives
- Independent advisors
- Family office executives
Meets monthly or quarterly to:
- Review performance
- Approve investments above thresholds
- Hire/fire senior staff
- Set operational policies
Investment Committee
Focused specifically on investment decisions:
- Review portfolio strategy
- Approve new investments
- Monitor performance
- Manage risk
Can include family members, staff, and external advisors.
Organizational Structure
How you organize staff and functions shapes daily operations.
Centralized Model
All functions report to a single executive (CEO/Executive Director).
Pros:
- Clear accountability
- Unified strategy
- Efficient decision-making
Cons:
- Heavy reliance on one person
- Can become bottleneck
- Succession risk
Functional Model
Staff organized by specialty (investments, tax, legal, etc.).
Pros:
- Deep expertise in each area
- Career paths for specialists
- Clear responsibilities
Cons:
- Potential silos
- Coordination challenges
- May duplicate efforts
Hybrid Model
Combines centralized leadership with functional expertise.
Most family offices use this approach—a strong executive coordinates specialized teams.
Key Positions and Roles
Define roles clearly to avoid confusion.
Executive Leadership
Chief Executive Officer / Executive Director
- Overall leadership and strategy
- Family relationship management
- Staff oversight
- External relationships
Chief Investment Officer
- Investment strategy and policy
- Portfolio management oversight
- Manager selection
- Performance reporting
Chief Financial Officer
- Accounting and financial reporting
- Cash management
- Budgeting
- Tax coordination
Specialized Roles
General Counsel
- Legal matters and contracts
- Compliance oversight
- Litigation management
- Entity maintenance
Director of Tax
- Tax planning strategies
- Compliance and filings
- Audit management
- Structure optimization
Director of Estate Planning
- Wealth transfer strategies
- Trust administration oversight
- Succession planning
- Document maintenance
Director of Philanthropy
- Charitable giving strategy
- Foundation management
- Grant making
- Impact measurement
Staffing Models
You don't have to hire everyone full-time.
In-House Staff
Full-time employees dedicated to your family office.
Best for: Core functions, relationship management, sensitive matters.
Outsourced Functions
External providers handle specific tasks.
Best for: Specialized expertise, variable workloads, cost efficiency.
Common outsourced functions:
- Investment management
- Tax preparation
- IT support
- Compliance
- Legal work
Hybrid Approach
Most family offices combine in-house core staff with outsourced specialists.
Example structure:
- In-house: CEO, CFO, Executive Assistant
- Outsourced: CIO (consultant), Tax (CPA firm), Legal (law firm)
Technology Infrastructure
Structure includes how you organize information and systems.
Document Management
Central repository for all family documents:
- Legal agreements
- Investment records
- Tax returns
- Estate plans
- Meeting minutes
Use secure data rooms with:
- Granular access controls
- Activity tracking
- Version history
- Audit trails
Financial Systems
- Portfolio accounting and reporting
- General ledger
- Bill payment
- Cash management
- Performance analytics
Communication
- Secure email
- Video conferencing
- Family portal
- Document sharing
Decision Rights Matrix
Document who can make what decisions.
Example Framework
| Decision Type | Family Council | Board | CEO | Investment Committee |
|---|---|---|---|---|
| Strategic direction | Approve | Recommend | Propose | - |
| Annual budget | Approve | Approve | Propose | - |
| Investments over $5M | - | Approve | Recommend | Recommend |
| Investments under $5M | - | - | Approve | Recommend |
| Staff hiring | - | Senior only | All other | - |
| Distributions | Approve | Recommend | Propose | - |
Customize thresholds and categories for your family's needs.
Reporting Structure
Define how information flows.
To Family Council
- Quarterly performance summaries
- Annual strategic reviews
- Major decisions requiring approval
- Risk and compliance updates
To Board
- Monthly financial reports
- Investment performance
- Operational updates
- Staff matters
Within Staff
- Weekly team meetings
- Monthly all-hands
- Project-based collaboration
Real-World Examples
Here's how real families have structured their offices, based on actual discussions from Reddit's r/fatFIRE community:
Example 1: The $120M+ Hectomillionaire
A tech executive who accumulated wealth through an IPO shared his detailed approach to family office services. His "Confessions of a Hectomillionaire" series on Reddit became one of the most upvoted posts in the community:
Key insight: He was quoted $150K-$375K per year for full-service family office management (0.5-1.25% AUM). Instead, he chose a flat-fee DFA advisor.
His portfolio structure after IPO:
- $15M into DFA portfolio (65% equity, 30% fixed income, 5% commodities)
- $5M cash for discretionary investments
- $10M company stock (diversified over time)
- $2M into DAF/Foundation
Example 2: The $100M+ Journey
In Part 1 of the same series, this verified high-net-worth individual shared his philosophy on managing generational wealth:
Key takeaways:
- Once you reach $30M+, the question becomes "what's the point of extra zeros?"
- Focus shifts from accumulation to purpose and meaning
- Important to rebuild structure, routine, and identity after FI
Example 3: The $10M+ Personal Injury Attorney
A personal injury lawyer shared his journey building wealth through his law firm, with detailed insights on structuring a family business:
His approach to structuring wealth:
- Built a family-style business with spouse involved
- Focus on building equity through business ownership
- Considered in-house vs big firm trade-offs early in career
Lessons from These Examples
Several patterns emerge from real family office structures:
-
Start with MFO, not SFO. Even at $75-120M, many choose multi-family offices over building their own.
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Fee sensitivity matters. High-net-worth individuals scrutinize AUM fees carefully—flat-fee or hybrid arrangements are popular.
-
Trusts are foundational. GST trusts, irrevocable trusts, and 529s appear consistently for tax efficiency and wealth transfer.
-
Family governance documentation. Family charters and written values help guide multi-generational decisions.
-
Hybrid staffing models. Most combine professional management with hands-on involvement in certain areas.
Common Structural Mistakes
Avoid these pitfalls:
Unclear decision rights. If nobody knows who decides, decisions don't get made—or the wrong person makes them.
Over-complicated governance. More committees and approvals create bureaucracy. Keep it as simple as possible.
Under-investing in technology. Manual processes don't scale and create security risks.
Ignoring succession. What happens if key people leave? Plan for transitions.
Misaligned incentives. Staff compensation should align with family goals, not short-term metrics.
Structuring for the Future
Build flexibility into your structure:
- Review governance annually
- Adjust as family needs change
- Plan for generational transitions
- Document everything for continuity
The best family office structures evolve over time while maintaining core principles.
Conclusion
Family office structure isn't one-size-fits-all. Your legal entity, governance model, and organizational design should reflect your family's unique needs.
Start with clarity on goals and decision-making. Build legal structure to match. Staff appropriately for your scale. Invest in systems that enable secure, efficient operations.
Most importantly, document everything. Good structure creates clarity that benefits your family for generations.