"Management" companies are used for tax avoidance. You claim that this company is "managing" another company which makes profit. Management co charges the profit-making co. management fees, effectively transferring income from one entity to another. If the "management" company has past losses that can be carried forward, or some other mechanism for paying lower tax (say, it's in a low-tax jurisdiction) the end result is tax avoidance. I'm not familiar with US tax code but I'm sure this scheme isn't technically permissible, but you can probably go awhile without being caught/taken to court.