What is a Management Company

Modern business requires effective management, especially for holdings, groups of companies, or large enterprises with extensive structures. Establishing a management company becomes the optimal solution to centralize strategic management, optimize resources, and increase business competitiveness.

The management company performs key functions of asset management, strategy development, financial control, and coordination of subsidiaries’ activities. Its creation can be beneficial both from the point of view of operational management and from the point of view of taxation. However, such organizations’ legal status and functionality may vary significantly from country to country.

In this article, we will examine a management company, its tasks, advantages and disadvantages, and the legal aspects that need to be considered when creating it.

Concept and Functions of a Management Company

A management company is a legal entity established to manage assets, coordinate work, and monitor the activities of one or more companies. It can act as a strategic center that develops and implements business strategies, manages finances, and ensures effective interaction among divisions or subsidiaries.  

Depending on the business objectives, a management company can be managed through trust management agreements or as a parent organization in a holding company. An important difference between a management company and an ordinary commercial organization is that it may not conduct production activities on its own but focuses on coordination and management.  

Main Tasks and Functions of the Management Company  

The functions of a management company may vary depending on the specifics of the business and the chosen management model, but among the key tasks are:  

1. Strategic management  

• Development and implementation of a long-term development strategy.  
• Optimization of the organizational structure of the group of companies.  
• Analysis and adjustment of business processes.  

2. Financial control and management  

• Optimization of tax planning.  
• Control over financial flows and budgeting.  
• Attracting investments and managing risks.  

3. Legal support  

• Development of corporate documents.  
• Support of transactions and contracts.  
• Monitoring compliance with legislation.  

4. Personnel coordination and management  

• Selection and training of the management staff.  
• Development of an employee motivation system.  
• Implementation of corporate standards and values.  

5. Interaction with partners and government agencies  

• Representing the interests of the entire group of companies.  
• Work with regulatory authorities.  
• Conducting negotiations with investors and counterparties.  

Types of Management Companies 

A management company is key to effective business management, especially within holding structures. Its main tasks are centralized asset management, strategic planning, and optimization of business processes. Depending on the field of activity and business objectives, the management company can take different organizational forms and perform financial and operational functions.

There are several types of management companies, each focused on specific tasks:  

1. Corporate management companies 

• Manage the activities of holdings, conglomerates, and groups of companies.  
• Carry out strategic planning and control over all subsidiaries.  

2. Financial management companies  

• Manage investment assets and financial flows.  
• Develop financial strategies, including tax planning.  

3. Operational management companies  

• Responsible for the administrative and business processes of the group of companies.  
• Focus on optimizing operational activities and personnel management.

4. Real Estate Management Company  

• Manage residential and commercial facilities, ensuring their operation.  
• Monitor the work of contractors providing utilities and maintenance services.  

5. Franchise management companies  

• Coordinate the activities of franchise networks.  
• Develop work standards and monitor their compliance with partners.  

When you Need a Management Company 

The decision to create a management company should be based on the business’s needs, scale, structure, and long-term goals. In some cases, the management company becomes a key element of effective management, helping to reduce the administrative burden, optimize financial flows, and increase the transparency of business processes. Here are some circumstances where the management company will benefit the business.

1. Extensive business structure 

If a company consists of several legal entities, branches, or subsidiaries, centralized management allows:  

• Combine strategic planning and coordination of activities of all departments.  
• Eliminate duplication of functions and improve the efficiency of decision-making.  
• Ensure uniform management and control standards.  

2. Optimization of taxation and financial flows  

A management company can serve as a financial center, redistributing resources within a group of companies. This is especially important if you need:

• Reduce the tax burden through internal redistribution of profits.  
• Centralize accounting and reduce financial transaction costs.  
• Create a transparent reporting system for investors and regulatory authorities.  

3. Conducting investment activities  

The management system is often used to manage assets and investments in holding structures. It allows you to:  

• Effectively monitor portfolio investments.  
• Protect assets from the risks of subsidiaries’ operating activities.  
• Simplify the process of attracting external investments.  

4. Scaling your business and entering new markets  

When a company is planning expansion, the management structure can help:  

• Organize unified control over the development of branches in different regions or countries.  
• Ensure compliance with local legal requirements.  
• Simplify interaction with partners and clients.  

A management company becomes necessary when a business requires centralized management, tax and financial optimization, asset protection, or efficient scaling. Its creation makes it possible to build a clear and transparent management system, reducing risks and increasing the company’s competitiveness.

Procedure of Creating a Management Company 

Creating a management company requires detailed planning and compliance with legal requirements. The registration process may differ depending on the organizational and legal form and field of activity, but the main stages remain similar.  

The process of creating a management company includes several stages—from choosing an organizational and legal form to registration with the tax authorities. For the successful operation of the management company, it is important not only to properly file documents but also to consider tax aspects to optimize costs and minimize risks.

Main Stages of Registration of a Management Company  

1. Determining type of the organizational and legal form 

In Belarus, a management company can be registered as a limited liability company (LLC) or a joint-stock company (JSC).  

The choice of form depends on the business structure, the number of founders, and the plans to attract investment.  

2. Development of constituent documents  

• The charter of the management company prescribes the objectives of the activity, the management procedure, and the main functions.  
• The protocol or the decision of the founders on establishing the company.  

3. Selection and registration of a legal address  

Supporting documents are necessary: a lease agreement, a letter of guarantee from the premises owner, or a document on ownership.  

4. Submission of documents to the registration authority or notary

• Application for registration of a legal entity.  
• Constituent documents.  
• Documents on the registration of the authorized capital.  

5. Obtaining a certificate of state registration  

After reviewing the application, the registration authority enters the information into the Unified State Register of Legal Entities .  

6. Registration with the tax inspectorate and other authorities  

• Registration with tax authorities, determining the taxation system.   
• Registration with the Federal Tax Service and Belgosstrakh.  

7. Opening a bank account  

Choosing a bank and submitting the necessary documents (charter, registration certificate, decision on appointment of the head, etc.) if no bank account is opened during state registration.

8. Obtaining the necessary licenses (if required) 

Some activities of management companies require licensing. For example, investment asset management.

Financial and Tax Aspects  

1. Tax regime  

Management companies may apply a general taxation regime or a simplified system (subject to revenue limits and specific types of activities).  

Management companies are usually taxed on profits at the standard rate.  

2. Tax optimization

When managing several companies, applying tax planning to reduce the tax burden is possible.  

An instrument of financial optimization can be using internal contracts to provide management services.  

3. Financial reporting

Management companies require keeping accounting records and submitting reports to tax authorities, the Federal Tax Service, and statistical authorities.  

Strict control over the movement of financial flows within the group of companies is necessary.  

How to Choose the Optimal Management Model

The choice of a company’s management model plays a key role in its effectiveness, strategic development, and resilience to market changes. A management company can perform different functions depending on the specifics of the business, the asset structure, and the owners’ goals. To make the right choice, it is important to consider a number of factors and follow practical recommendations.  

Factors that Influence the Choice of Management Structure

1. The size and scale of the business  

Small and medium-sized businesses are likely to use simple management models, such as direct or operational management through the CEO.  

Large companies, especially holding companies, require centralized management and often create management companies.  

2. Organizational structure of the group of companies  

If a business consists of several divisions, branches, or subsidiaries, it is advisable to create a management company to coordinate their activities.  

In holding structures, the management company can perform strategic management functions, leaving operational tasks to individual companies.  

3. Type of activity  

Manufacturing companies need a management model that ensures strict control over operational processes and product quality.  

Investment and financial companies rely on models emphasizing asset management and minimizing tax risks.  

4. Business geography  

If there are international divisions, separate criminal codes may be used in different countries, considering tax legislation.  

A local business is usually managed from a single center.  

5. The goals of the owners  

If the owners seek to minimize their involvement in operational management, it makes sense to transfer the functions to the top management of the management company.  

If flexible and fast decision-making is important, it is possible to maintain a decentralized structure.  

6. Tax and financial optimization  

Some management models allow you to effectively distribute costs between departments and reduce the tax burden.  

It is important to consider reporting obligations and transparency of financial flows.  

Practical Recommendations for Business

The choice of a management model depends on many factors: the size of the business, the organizational structure, the type of activity, and the strategic goals of the owners. Companies with an extensive structure and several lines of business most often need centralized management through a management company. However, there is no universal solution — the optimal model must consider the business’s individual characteristics and allow it to adapt to market changes. Here are some recommendations for businesses that are thinking about a management model.

1. Analyze current needs 

Evaluate how effectively the business is being managed at the moment.  

Identify the weaknesses of the existing structure.  

2. Involve experts 

Consultations with lawyers, financial specialists, and business consultants will help you choose the optimal model.  

Analyzing the experience of competitors and successful companies in the industry can also be useful.  

3. Choose a flexible structure  

The management model must adapt to business changes.  

It is not necessary to fix all processes rigidly — it is important to leave space for development.  

4. Optimize document flow 

If a company is planning to establish a management company, it is necessary to consider the legal formalization of internal contracts in advance. Regulated processes and clearly defined functions will help avoid duplication of authority.  

5. Set strategic goals  

The management company should control the current processes and engage in business development.  

Identify key performance indicators (KPIs) to evaluate the work of the management company.  

Conclusion

A management company is an effective tool for organizing and coordinating a business, especially if it includes several legal entities, branches, or lines of business. It helps to centralize management, optimize taxes and financial flows, simplify the company’s scaling, and minimize risks.  

The right choice of management model and management company structure depends on many factors, including the size of the business, its goals, and development strategy. To avoid mistakes when creating a management company, it is important to consider the legal, financial, and tax aspects. Professional consultants who develop optimal solutions, considering the specifics of a particular business, will help in this.  

We provide a full range of human resources and business management services, helping companies build effective management models, optimize processes, and achieve their goals. If you need advice on setting up a management company or corporate governance issues, our specialists can offer professional support and customized solutions.