Structuring Your Family Office: Should You Choose a Household Employer or an LLC?

Oct 20, 2025 | Family Office, GTM Blog

For family offices, the structure you choose can have a significant impact on everything from liability to tax management. A common question we encounter is whether it’s better to operate as a household employer or to set up a Limited Liability Company (LLC). The answer isn’t one-size-fits-all, but it ultimately comes down to your family’s specific risk profile.

Understanding the Household Employer vs. LLC Structure

A household employer is the most common and straightforward way to manage domestic staff. Under this model, the family or an individual directly hires employees like nannies, house managers, and chauffeurs. From a tax and legal perspective, the family assumes the role of an employer, responsible for federal and state tax withholding and other labor obligations, as well as providing a Form W-2 at the end of the year.

An LLC, on the other hand, is a separate legal entity. When a family office is structured as an LLC, it legally separates the family’s personal assets from the business’s liabilities. This can offer a layer of legal protection, as the LLC, not the individuals, is responsible for any claims that arise from an employee’s actions. This model may be more suitable for managing a diverse range of employees, from investment professionals to personal staff, particularly in situations where there is a higher level of financial and operational risk.

While some may have previously chosen an LLC for its perceived anonymity, this may no longer be the case. There are limits to anonymity through an LLC, as the identity of the beneficial owner must be disclosed to government agencies.

Assessing Your Risk Profile

While an LLC can provide a stronger shield against liability, the choice between these two structures depends on a thorough risk assessment.

Consider the following questions:

What is the scope of your operations? Is your family office a small operation with a few household staff, or is it a large, complex organization with investment professionals and a wide range of administrative staff?
What is your risk tolerance? Are you comfortable with direct liability as a household employer, or would you prefer the legal separation offered by an LLC?
What are your long-term goals? Will your family office grow and take on more employees or new types of operations in the future?

The answer to these questions will guide your decision on which structure offers the best balance of protection and practicality.

Compliance is the Constant

No matter which structure you choose, whether you operate as a household employer or an LLC, one thing remains constant: compliance is a top priority.

Properly managing a family office workforce requires meticulous attention to payroll, HR practices, and insurance. The risks of non-compliance are significant and can include costly fines, legal disputes, and reputational damage.

Even if you operate under an LLC, you are still bound by household employment laws. State-specific regulations, often referred to as a “Bill of Rights” for domestic workers, may apply regardless of your business structure. These laws can cover minimum wage, overtime pay, workplace protections, and paid leave requirements.

Additionally, in 2007, the IRS determined that a disregarded single-member LLC is still considered the taxpayer for employment tax purposes. IRB 2007-39 clarifies: “The final regulations clarify that the separate entity (disregarded entity) is treated as a corporation for purposes of employment taxes and related reporting requirements… a disregarded entity continues to be disregarded for other Federal tax purposes.”

This means you must maintain:

Accurate Payroll: Adhering to federal and state tax laws, including proper withholding and timely filings.
HR Best Practices: Ensuring you have clear work agreements, employee handbooks, and fair labor practices to avoid disputes.
Proper Insurance: Maintaining the right liability and workers’ compensation insurance to protect both your family and your employees.
Workers’ compensation is mandatory in most states, regardless of your business structure, and failing to carry it can result in severe penalties.

Consider Employee Benefits and Compensation

Navigating employee benefits and compensation adds another layer of complexity when choosing a legal structure. A family office must consider how the chosen model will impact its ability to offer competitive benefits, as a formal structure like an LLC may simplify the process of and provide easier access to group health insurance, retirement plans, and other benefits that are more difficult to administer under a simple household employer model. The quality of a family’s benefits package is crucial for attracting and retaining top-tier staff.

How GTM Can Help

Regardless of whether your family office is set up as a household employer or an LLC, GTM offers specialized solutions to handle your HR, payroll, and insurance needs. We provide the expertise and support to ensure you stay compliant, manage your employees professionally, and maintain the confidentiality of your operations. Contact us at (800) 929-9213 or book a complimentary, no-obligation consultation to learn how we can help your family office.