Guides · Family offices

Is a family office a legal or a tax designation?

Neither, strictly. “Family office” is not a type of company and not a tax status. The term has one precise legal meaning — under the SEC’s family office rule — and the tax result depends on what the office actually does, not on its name.

No such entity type

There is no “family office” corporate form in US state law. A family office is an ordinary entity — usually an LLC, sometimes a corporation or limited partnership — that manages a family’s investments and affairs. Formation, governance and liability follow the general entity statutes of the state chosen (often Delaware, Nevada, South Dakota or Wyoming).

The one precise legal definition: the SEC family office rule

Under the Investment Advisers Act, anyone paid to give investment advice is presumptively an investment adviser. The Dodd-Frank Act removed the old “fewer than 15 clients” exemption and directed the SEC to exclude family offices instead. SEC Rule 202(a)(11)(G)-1 (2011) excludes a family office from the definition of investment adviser if it:

• has no clients other than family clients (family members, certain key employees, family trusts and entities, and specified charities);
• is wholly owned by family clients and exclusively controlled by family members or family entities; and
• does not hold itself out to the public as an investment adviser.

An office that meets the rule does not register with the SEC or file Form ADV. A “multi-family office” serving unrelated families falls outside the rule and is generally a registered adviser. State investment-adviser laws can apply separately.

The tax side: deductibility of costs

The Internal Revenue Code has no family-office provision. The question is whether the office’s costs are trade-or-business expenses (§162) or investment expenses (§212):

• Managing your own investments, however large, is not a trade or business (Higgins v. Commissioner, 312 U.S. 212 (1941)). Those costs are §212 expenses, which are miscellaneous itemized deductions.
• The Tax Cuts and Jobs Act suspended miscellaneous itemized deductions for 2018–2025, and the One Big Beautiful Bill Act (2025) made the disallowance permanent (§67(g)). So for individuals, investment-management costs are now simply nondeductible.
• In Lender Management, LLC v. Commissioner, T.C. Memo. 2017-246, the Tax Court allowed §162 deductions for a family office that managed investment LLCs for many members of a multigenerational family, had profits interests in those LLCs, employed staff and provided services comparable to an outside manager. The case turns on its facts; a single-family office serving a few relatives and charging nothing is unlikely to qualify.

With §212 deductions gone permanently, the Lender structure — a management entity paid by profits interests in the family’s investment vehicles — has become a common planning model. It brings real requirements: separate ownership of the management company, arm’s-length services, and compensation tied to performance.

Other reporting

Under FinCEN’s March 2025 interim final rule, made permanent by a final rule effective 14 August 2026, US-formed companies and US persons are exempt from Corporate Transparency Act beneficial-ownership reporting; only certain foreign companies registered to do business in a state must report — see beneficial ownership. Family offices still face ordinary employer, entity and information-return filings.

Reviewed October 2026