Delaware holding company for entrepreneurs and families: who sits at the top

A holding company is not an end in itself. It pays off when several companies belong under one roof, when profits and losses should be looked at together, or when a family wants to keep its business assets in the USA well organized and pass them on. Delaware is the obvious state for this: its corporate law is the benchmark investors and courts follow, and a holding company that only holds investments there pays no state corporate income tax. This page walks through the questions you need to settle before formation: which entity type, who the owner is, what federal tax law says and what happens when an owner dies. The complete package with formation, holding resolutions and a register of subsidiaries is on the page Form a holding company in Delaware.

1When a holding company above your US companies makes sense

The holding company holds, the subsidiaries do the work. One subsidiary in Texas sells, one in Florida runs a warehouse, a third owns real estate. Each is registered in its own state and has its place of business, its tax numbers and its employees there. The Delaware holding company is the parent above them.

Four situations are typical. A mid-sized European business owns several US companies or is planning its second. An entrepreneur wants to set up the first US company so that more can be added later without restructuring. Several investors want to pool their shared US investments in one company. And a family wants to hold the US investments of several generations in one place, with clear rules on voting rights and succession.

Where it does not help: a holding company does not shift profit out of the subsidiaries. Each subsidiary pays tax on its profit where it is earned. And if you have a single US company and no plans for another, a directly held company is usually simpler. Holding structures outside the USA, such as a European parent for a US company, are covered on our page International holding companies.

2Corporation or LLC: the holding company's entity type

2.1The corporation as a holding company

For a group of companies, the corporation is the standard choice. For federal tax it is a taxpayer in its own right, can sit at the top of an affiliated group and can deduct dividends from its subsidiaries. It is formed by filing a Certificate of Incorporation; the state charges from $109, depending on the number of authorized shares. Investors know it well, and a later sale of individual subsidiaries or the entry of an investor can be handled cleanly. More on forming a Delaware Inc is in the article Form a Delaware Inc.

2.2The LLC as a holding company

The Delaware LLC gives you more freedom of design. Under § 18-1101 of the Delaware LLC Act, its LLC Agreement follows the principle of freedom of contract; under § 18-402 management can be delegated to one or more managers; and under § 18-703 a member's creditors only get a claim to that member's distributions. Registered series let you hold separate pools of assets under one roof, for an annual tax of $100 per series on top of the LLC's $400.

Without an election, an LLC is taxed as a partnership or, with a single member, is disregarded for tax purposes. It then cannot be the parent of an affiliated group or deduct dividends from its subsidiaries. If it elects corporate taxation on Form 8832, it becomes a corporation for federal tax, with all the rules that come with that. The election is binding: after a change in classification, a new election is generally not allowed for the following 60 months.

As a rule of thumb: for a group of operating corporations, a holding corporation is the right parent. The LLC fits better when family members or partners hold investments together and want to set the rules among themselves freely. How a Delaware LLC is formed is explained in the article Form a Delaware LLC.

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3What federal tax law offers the holding company

The most important tax reason for a US holding company is found in 26 U.S.C. § 1501. An affiliated group of corporations may file one consolidated return instead of separate ones. One subsidiary's profits and another's losses then come together on a single return. A subsidiary belongs to the group if the parent holds at least 80 percent of its voting power and at least 80 percent of the value of its shares, under § 1504(a)(2).

For European entrepreneurs, the next point is decisive: under § 1504(b)(3), foreign companies cannot be members of such a group. If your company at home holds its US companies directly, each files on its own, and one company's loss does not reduce another's profit. Only a US corporation between your home company and the subsidiaries makes the combined return possible.

3.1Dividends within the group

If a subsidiary pays a dividend to the holding company and both belong to the same affiliated group, the holding company deducts these qualifying dividends at 100 percent under § 243. The profit is taxed at the subsidiary and not a second time on its way up. What then happens to distributions from the holding company to its owners abroad is governed by withholding tax and tax treaties. (10 5)

3.2Reporting requirements

A foreign-owned holding company comes with reporting. For Form 5472, a US corporation is a reporting corporation if a foreign person holds at least 25 percent directly or indirectly. Through the holding company, the subsidiaries are indirectly foreign-owned too, and in a consolidated group each member is a separate reporting corporation with its own penalty of $25,000. New US companies with at least 10 percent foreign voting ownership must report to the Bureau of Economic Analysis on Form BE-13 within 45 days. Beneficial ownership reporting to FinCEN, on the other hand, no longer applies to companies formed in the USA, as set out in the rule that took effect on August 14, 2026.

4What the holding company costs and pays in Delaware

Every year by March 1, a Delaware corporation files its Annual Franchise Tax Report (fee $50) and pays the franchise tax. Delaware has two calculation methods. Under the Authorized Shares Method, a corporation with up to 5,000 authorized shares pays $175 a year; the Assumed Par Value Capital Method starts at $400 and is based on the company's assets. Which method gives your holding company the lower tax depends on the number of authorized shares and on its assets; with many authorized shares it pays to run both. The maximum is $200,000, or $250,000 for Large Corporate Filers. If you owe $5,000 or more, you pay in advance installments.

4.1No state corporate income tax for a pure holding company

Delaware taxes corporations at 8.7 percent, but only on income from activity and assets in the state. Title 30, § 1902(b)(8) expressly exempts corporations whose activity in Delaware is limited to holding and managing their intangible investments (stocks, bonds, loans to affiliated companies, patents and trademarks) and to collecting and distributing the income from them. That is exactly what a pure holding company does. If it provides services to the group in Delaware itself, such as administration or management, the exemption should be checked in advance.

Federal tax and the taxes of the states where the subsidiaries operate are not affected. The Delaware holding company does not give the subsidiaries a tax advantage over Texas or Florida; the advantage lies in the law and in the combined return.

5Families: ownership, succession and inheritance

5.1Who holds the holding company's shares

For families, the first question isn't the holding's legal form but who owns it. If your family company at home holds the holding, the US structure stays part of that business. If family members hold the shares directly, they are personally shareholders in a US corporation. That's perfectly possible legally, but it has a consequence that's often overlooked.

5.2US estate tax

For people who are neither US citizens nor US residents, shares count as US assets if they were issued by a domestic corporation. That's set out in 26 U.S.C. § 2104(a), and shares in a Delaware holding are included. Shares in a company incorporated outside the US, by contrast, are not shares of a domestic corporation. According to the IRS, the heirs must file a US estate tax return on Form 706-NA if the deceased's US assets, together with certain gifts, exceed $60,000.

The US has estate and inheritance tax treaties with some countries. If you rely on such a treaty, the IRS lets you claim a pro rata exemption or exclude certain assets, attaching Form 8833. How that works out depends on the treaty and the assets. For planning, this means: if you hold shares in a US holding personally, plan your succession with both legal systems in mind. Read more about estate tax on foreigners' US assets in US estate tax for foreign owners.

5.3Rules for the next generation

Whether it's a corporation with bylaws and a shareholders' agreement or an LLC with an LLC Agreement: the rules on voting rights, transfers within the family, rights of first refusal and bringing in the next generation belong in the formation documents, not in the estate. Delaware gives you plenty of room here, and the LLC Agreement is especially flexible.

6Order: holding first or company first

Both work. If you form the holding first, it forms its own subsidiaries and the ownership is right from day one. For your operating subsidiary, you choose the state where it does business, such as Texas or Florida; the article Choosing the right state compares your options. If you already have US companies, you can bring them under the holding later. That's a separate step with tax consequences in the US and at home, and it should be reviewed in advance.

How distributions flow from the holding to you or your company at home, and what remains taxable at home, is set out in writing in our tax concept, coordinated with your accountant at home. For US real estate there's a dedicated structure, the US blocker for real estate.

7What a Delaware holding is not

A Delaware holding is not a way to collect income from outside the US tax-free. Its subsidiaries have their places of business in the US and pay their taxes there, and the holding itself, as a corporation, is a separate federal taxpayer. If you're looking for a US company without US business, head over to our sister site zerotax.llc. For a group with real US business, we form your Delaware holding with you.

In short

• A Delaware holding owns the shares of your US companies; the subsidiaries do business in the state where they operate.
• A consolidated group tax return requires a US corporation at the top with at least 80% of the vote and value of each subsidiary; your company at home can't take on this role.
• In Delaware, the holding corporation pays $50 for the annual report and franchise tax from $175; there's no state corporate income tax if it only holds and manages investments there.
• If family members without US residence hold the holding's shares directly, those shares are US assets for estate tax purposes; the filing threshold is $60,000, and estate tax treaties may help.
• Form 5472 and the BE-13 report apply to every foreign-owned holding; the BOI report to FinCEN is no longer required.

How we help you

• Delaware holdingThe holding above your US companies, with one consolidated tax return.
• Tax structureA clean structure between parent company and US subsidiary, or between you and your US company, coordinated with your accountant.
• Form a CorporationThe US corporation (Inc) for growth, investors and your visa.
• Company formation consultationEntity type, state and tax consequences, before you commit.