An Overview of Family Offices in India

Family Offices, a wealth management entity created for asset protection, investment and succession planning vehicles tailored to the specific needs of high net worth individuals and family specific to the needs and preferences of the family to protect its legacy and wealth from generation to generation.

A. Why to form a Family Office (FO):-

a.     Ease of Collective Investment:- To allow family members to invest collectively with reduced investment costs and access to wide range of investment opportunities. Provided opportunities to young family members for exposure to ever evolving financial world and part of critical decision making process.

b.     Tax Savings:- Been structured in a manner to get benefit under tax schemes and permissible to  deduct investment management fees and other administrative expenses that are generally non-deductible by individuals.

c.       Ease of Co-ordination and Management with external advisors:- Enjoy shared services for tax, legal, accounting & investment by external advisors to all the family members.

d.     In addition to the above, the additional reasons to form a Family Office are:

i.                 A long term investment horizon, perhaps spanning generations;

ii.               Unencumbered by regulatory constraints placed on institutional investors;

iii.             Diverse and non-traditional asset allocation;

iv.             Significant interest in private equity direct invest and co-invest opportunities;

v.               Focus on wealth preservations vs. growth. The more generations served, the stronger the focus on preservation;

vi.             Liquidity preference driven by the relative cash needs for the family;

vii.           Use of family pooled investment vehicles to promote co-investment.

B.        Types of Family Offices:-

In general, there are 3 types of Family Offices as listed below:

i.                 Embedded Family Office:- When there is no formal family office been incorporated, but a senior employee (such as CEO, CFO etc.) of the family business shall provided services to the many family owned businesses  as they are under a single family office.

ii.               Single Family Office:- An entity that provide services to one family.

iii.             Multi-family Office:- An entity that provides services to multiple families.

C.        Legal structure of Family Offices in India:-

For setting up a Family Office, various factors are taken into considerations which includes but not limited to long-term investment objectives, vision of the family concerned, the risk appetite, future requirements of different family members, applicable legal, regulatory and tax regime of various jurisdictions involved, etc.  In India, a Family Office can be set up as following legal entities:

i.                 Private Limited Company;

ii.               Limited Liability Partnership;

iii.             Private Trust

A recommended legal structure is where the exposure and liability of family members is limited. Based upon the vision and requirement of family members, the incorporation documents of Family Office is structured. Further, tax liability is an important factor to be contemplate for the jurisdiction and structure of Family Office.

Post incorporation, for proper governance of the Family Office, a family council is been constituted consists of family members and trusted advisors to oversee the operations of the Family Office. In addition to the family council, a Chief Investment Officer is also appointed who shall be responsible to identify and evaluate strategic investments and manage the investments including but not limited to engage the external advisors for investment allocation, accounting, tax and legal compliance.

D.        Common Business Activities of Family Office (FO):- In general, the Family Office, provide following services:

       i.          Financial reporting, accounting and tax preparation services;

     ii.          Investment management services which includes to create a large investment pools that can be accessed by multiple family members;

   iii.          Direct investment in operating companies, financial instruments, real states and other direct investment as agreed in the family council;

   iv.          Asset Management, Insurance, Family Education, Co-ordination, Succession Planning and Risk Assessment;

     v.          Philanthropy

As Family Office(s) have witnessed enormous growth among high net worth (HNW) individuals and families to invest in India and cross border among various sectors including but not limited to technology, real estate, financial instruments etc., the legal, tax and regulatory framework for Family Offices can be complicated, requiring the expertise of competent advisers. The following are common considerations to be contemplated prior to incorporate and operate the Family Office (FO):

i.                Legal Considerations:-

a.     Should the Family Office be structured as a company, partnership, trust or some other legal entity?

b.     Who shall own and control the Family Office?

c.      What is the appropriate legal jurisdiction for the Family Office?

d.     What other legal agreements are necessary such as employment agreements and service agreements?

e.     How to settle the dispute among the family members, exit of any family member(s) and succession planning?

ii.              Tax Considerations:

a.     For tax purposes, how should the family Office be structured?

b.     Will the Family Office activities rise to the level of a trade or business?

c.      Are there gift or estate tax issues concerning Family Office ownership and successions?

d.     Will there be tax impact for family members?

e.     How will the role of the Family Office impact international family members and/or structures?

f.      Is there sufficient flexibility to cater for change in tax and regulatory rules as well as family circumstances?

This article is for information purpose only and should not be taken as legal advice. To know further details, clarification, assistance or any advice on Family Office, its structure, operations, regulatory compliance, or any legal issues on Family Office, you may connect with us at  / 08448824659 and visit