Do you have a holding company?

I doubt this makes any sense at all for you or other people in similar situations. You should check with someone who knows more than I do, but S corps can't be owned by non-person entities (so you'd have to elect C corp status for all of them)

I don't see how a holding company helps with liability protection. Either the entities provide it or they do not. If they do, no problem, if they do not, then the shareholder (you or the holding company) is now liable. I guess there is then one small level of additional protection for you personally, but it seems like a real hassle to do that since that risk can be avoided just by operating your entities correctly.

I have one, at the suggestion of my accountant. It's not for liability purposes, but tax planning purposes. Oddly, I wrote about this on my blog last week (sorry for the self promotion). Your best bet is to call your accountant and ask about it in regard to your personal situation.

Holding companies are usually set up for tax purposes. Consulting with a good tax cpa for your individual situation is best as it gets complex.

Having errors and omissions insurance coverage also helps with protecting your company from claims if your client holds you responsible for errors, or the failure of your work to perform as promised in your contract.

I have considered a holding company and do "sort of" have one for one of my ventures but it seems to me not worth it for small businesses.

To benefit from the increased liability protection, you still have to have separate entities for what the holding company owns. If you don't, then they are just divisions or product lines of the holding company.

So for me, the paperwork was just too much and the protection not enough to justify having to do the books for the holding company and the separate entities that it owns.

One thing to think about is a Nevada LLC. That is the only state that I know of where you can carve out separate, independent "companies", within a single LLC. It's complex and I don't fully understand how it's done but it's possible.

I have one. I'm based in Denmark though, so the laws are not the same. My holding company owns my LLC, and I own the holding company.

The trick is that you can transfer the money out of the LLC to the holding company, so they are "safe" if your LLC gets sued.

I take it the question is directed at the United States of America... I can't say much as my own experience with my own holding company is from a different legal jurisdiction.

One important thing that I have not seen mentioned though: Depending on ownership structures and tax law, using a holding company may allow you to transfer money from one subsidiary company to another without being taxed during transfer.

Someone recently explained to me how they use a holding company for extra liability protection.

One of the issues that comes up with liability protection is that, should you be personally sued, you can loose a majority percentage of your business holdings in said suit. If you own several small companies, all your companies can be open to take over by someone suing you.

The laws of incorporation in certain states allow a company owner with a minority share to maintain full control of their business. By creating a holding company in such a state, then giving full ownership of your other companies to your holding company, you afford yourself "reverse protection." A plaintiff can't touch your other companies because you don't own them. If they sue you for your holding company and manage to take a majority percentage, they can't do anything with it since you still maintain full control. Knowing this, in most cases, they won't waste their time and money on said suit.

I'm not sure of all the details (it was a cocktail party conversation) but a lawyer could probably lay out the pros and cons.