Family Business

Understanding and defining the different forms of a family office


4 min




Listen to Kathryn McCarthy, a Family Business Advisor and Family Office Expert, explain the different roles and activities of family offices based on her years of experience working with business families. A family office is devoted to serving the needs of the family as well as defining and achieving a set vision and mission.


Kathryn McCarthy



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The family office it is an entity that serves the needs of the family, and I would add that the entity affects the family’s mission and vision. When I think of a family office, I think of an integrated operation that does pretty much everything that the family needs, again, to affect their mission. And it could be a freestanding office. It could be an office embedded in a family business. It could be an office that works with a foundation. It may not be a legal entity; it may just be a fictional entity, but it has a group of people who are dedicated – that is usually a determinate – there is a dedicated group of people, and it does what the family wants it to do. And lots of people have these offices, and they do not even know it. So one of the things I do ... View More with family businesses is try to help them think through, they have got these guys sitting in the corner, but what else do they need? And it is usually by that point there is another generation who is asking questions or who needs education. The definition of a family office varies, because the definition of family varies. There is the typical founder’s office where it is the patriarch, may be embedded in the family business. There is the multigenerational office where there is more than one probably three generations, the patriarch, the next generation, and then probably grandchildren. So those are defined by generation. Their focuses are very different. The patriarchal office is focused on the patriarch, may just be doing bill paying, may just be doing some accounting. The multigenerational offices usually have some invest management. They usually have some financial planning, because they are dealing with cash flow issues around either the money coming from the operating business or the money that they got when they sold the businesses. When you get three generations and you get hundreds of people, they have very different needs. There is also offices that are defined by focus. Philanthropic offices, where there may not be a foundation but there is a strong philanthropy operation, education-focused offices, there is offices that are usually multigenerational but just do compliance, they just do tax work. I have been working with family businesses where the real mission was to develop good shareholders and to communicate with the company where the family members were not working in the company anymore. They were directors. And so there was enough complication, there was enough focus, there was enough desire that they set up a family office to really manage shareholder relationships, to manage the education of the next generation, to manage the education of the existing directors. The mission is governance of the family and support of the family governance around the family business, and you know, if they came to me off the street and said, “I have millions of dollars. Should I set up a family office?” I would have said, “No,” but it is just different. They have an articulated mission and a vision. Then I say, “Yes, that is a family office.”