Chapter 1
IN THIS LESSON
1. Organizational Overview
Structure (Top-Down):
Dynasty Trust / Family Trust (Irrevocable) – ultimate asset owner; holds 100% of all holding shares and ownership interests.
Holding Company – top-tier management and oversight entity; collects dividends, IP, and licensing fees from the Parent Company and Captive Insurance Company.
Parent Company – serves as the corporate office for all subsidiaries; handles bookkeeping, payroll, and private concierge services. Consolidates internal operations and management functions before reporting upward to the Holding Company.
Operating Companies (Subsidiaries) – income-generating businesses (consulting, e-commerce, services, etc.); operate under the Parent Company’s administrative and financial management.
REIT / Property Entity (if applicable) – real estate investment or asset-holding company; transfers dividends and management income upward to the Parent Company.
Family Office / Asset Management Entity – manages loans, investments, vehicles, and retained capital; funds subsidiaries through secured promissory notes or strategic capitalization.
Captive Insurance Company – collects risk-management premiums and retains tax-deferred reserves; transfers retained earnings or reserves upward to the Holding Company.
Nonprofit / Foundation – receives grants or donations; contracts with Operating Companies for service delivery (e.g., training, housing, consulting); may receive documented contributions from for-profit entities.
2. Financial Flow Summary
This design creates a closed-loop system that preserves liquidity, minimizes taxes, and protects assets.
All inter-company transfers are governed by formal business-to-business contracts for compliance and documentation. This design creates a closed-loop system that preserves liquidity, minimizes taxes, and protects assets.
Standard Flow:
1. Operating Companies → Parent Company
• Pay management, bookkeeping, private concierge, and payroll fees under IRC §162 (deductible).
• The Parent Company acts as the corporate office for shared internal services and administration.
• Consolidates revenue from all subsidiaries for financial reporting and operational oversight.
2. REIT / Property Management Entity → Parent Company
• Transfers property management fees, maintenance income, or dividends upward for consolidation.
• Keeps real estate and facility management separate but under unified control.
3. Family Office / Asset Bank → Parent Company
• Directs funds for payroll, operations, or concierge support when needed.
• May lend or allocate strategic capital to the Parent Company for operational liquidity.
4. Parent Company → Holding Company
• Sends retained profits, management fees, or licensing revenue upward for consolidation.
• Acts as the operational bridge between working entities and the Holding Company.
• Maintains majority ownership of Operating Companies, REIT, Property Management, and Family Office.
5. Captive Insurance Company → Holding Company
• Collects deductible risk-management premiums (up to limits under IRC §831(b)).
• Retains reserves tax-deferred, strengthening internal liquidity.
• Distributes retained earnings or reserves upward when appropriate.
6. Holding Company → Dynasty Trust (Irrevocable)
• Declares qualified dividends to the Trust (owner of all shares).
• Trust records passive dividend income — no self-employment tax.
7. Dynasty Trust → Family Office / Asset Bank
• Allocates strategic capital or issues loans (secured promissory notes, typically 4–6% interest).
• Funds vehicle purchases, investments, or subsidiary capitalization.
8. Family Office / Asset Bank → Subsidiaries / Operating Companies
• Issues operating loans or investments for expansion.
• Receives repayment with interest to grow its balance sheet.
9. Nonprofit / Foundation → Operating Companies
• Contracts with Operating Companies for program delivery (training, housing, consulting, etc.).
• Payments are deductible expenses for the nonprofit and taxable revenue for the Operating Companies.
• May also receive properly documented donations from for-profit entities to fund charitable missions.
✅ Top-Down Recap:
Operating Companies / REIT / Family Office → Parent Company → Holding Company → Dynasty Trust →
Family Office / Asset Bank → Subsidiaries → Nonprofit / Captive / REIT → back into the system.