IP holding company
A separate entity that holds intellectual property and licenses it to operating entities.
Definition
IP holding company is a structure where intellectual property (trademarks, patents, copyrights) is held in a separate entity and licensed to operating entities. Provides asset protection and can offer tax planning benefits.
Context
Delaware LLCs commonly used as IP holding companies due to favorable law and contractual freedom.
Example
A founder holds trademark and software IP in a Delaware LLC and licenses it to the operating Delaware LLC. Royalty payments flow between the two LLCs.
Common pitfalls
- Transfer pricing rules for intercompany royalties.
- Substance-over-form risk if IP holding lacks economic substance.