One of the most common questions we get from startup founders is whether they should set up a holding company structure – and if so, when.

The short answer? There is no single “right” answer. It depends on your stage, your ambitions and your appetite for admin. But it helps to think about company structures in three simple shapes – the dot, the line and the triangle. Let’s take a look!

The Dot – Single Company

This is the simplest structure going. One company that does everything – owns the IP, signs customer contracts, receives revenue and employs staff.

For many early-stage startups, this is perfectly fine. It is cheap to run, easy to manage and avoids unnecessary complexity. Every extra entity you add means another ASIC annual fee, another tax return and more bookkeeping overhead.

If you’re pre-revenue and still validating your model, there is nothing wrong with staying as a dot. Don’t let anyone pressure you into adding complexity before you actually need it. Your focus should be on building the product and finding customers – not maintaining a corporate structure that is ahead of where the business actually is.

The Line – Holding Company + Operating Company

The next level up is what we call the “line” structure. You introduce a holding company at the top, and it owns 100% of an operating subsidiary underneath.

In this model, the operating company signs customer contracts, collects revenue, runs payroll and pays suppliers. The holding company typically holds the shares and may also hold key assets such as trademarks or core IP.

Why bother? There are a few solid reasons. First, asset protection – separating valuable IP or cash from day-to-day trading risk means your most important assets aren’t exposed if something goes sideways in operations. Second, investor readiness – a clean holding structure is what most investors expect to see when they are looking at a deal. Third, flexibility – it’s much easier to add new subsidiaries later, including offshore, when you already have a holding company in place.

Here’s something many founders do not realise: in Australia, you can usually “top hat” a company. That means you can insert a holding company above your existing company under the restructure provisions at any time, without triggering tax – provided the ownership doesn’t really change. So you can wait until you actually need it.

However, moving IP between entities can be more complex. If IP has already been developed and has value, transferring it may be treated as a sale – potentially creating tax consequences. That is why, if you know you want a line structure, it can be cleaner to put it in place early, before material value is created.

The Triangle – Holding + Operating + IP Company

The most complex version adds a separate IP company. The structure becomes a triangle – with IP owned in one entity, operations in another, both owned by a holding company.

This can make sense in specific situations. If you’re licensing IP to third parties, planning to expand internationally or you want to isolate and protect high-value technology, the triangle gives you cleaner separation and more flexibility.

For example, if an Australian business later licences its software into the US, having clear IP ownership and formal licence agreements between entities becomes far more important – particularly once sophisticated investors are involved and scrutinising your structure.

That said, every additional entity increases cost and administration. Separate bank accounts, intercompany loan agreements, licence agreements and ongoing compliance all need to be managed properly. If there’s no commercial reason for the added complexity, you’re just burning time and money.

So What Should You Do?

Early-stage startups often do not need to over-engineer their structure. A simple dot can work – until it doesn’t.

If you’re about to launch commercially, raise capital or invest heavily in technology and trademarks, a line structure is often a sensible middle ground. It balances protection and flexibility without unnecessary complexity.

The triangle can wait until there is a genuine commercial reason for it – like international expansion or third-party IP licensing.

The key principle to remember is this: structure should support strategy, not get ahead of it. Get the foundations right for where you are now, and plan for where you are heading next.