Summary
An LLC can indeed own another LLC through a series LLC structure, which offers liability protection and segregates assets. Each subsidiary’s LLC liabilities remain separate. Series LLCs simplify taxes and offer limited liability, making them beneficial for various business scenarios, particularly for real estate investors.
The answer to the question is YES. This can be accomplished by utilizing a series LLC structure.
A series LLC is essentially a traditional LLC with the added ability to create cells or subsidiary LLCs within the framework of one LLC. This structure is often used to protect against personal liability and to insulate one business from the debts and obligations of another.
Before states began to authorize the use of series LLCs, business owners, and investors needed one business entity for each company or property they owned if they wanted to insulate each from the liabilities of the others.
Now, a business owner or investor can insulate him or herself from personal liability and insulate multiple businesses or properties from each other by utilizing a single series LLC.
Here Is How a Series LLC Works
Imagine owning a condo and a duplex. If you personally own these two properties, you will be personally liable for any obligations and liabilities related to these properties. And all of your non-exempt assets, including the condo, duplex, and your personal assets will be at risk.
If a traditional LLC is used to buy the condo and the duplex, you will be insulated from personal liability. But, both the condo and the duplex will still be exposed to the liabilities of the other.
In this case, you can create a parent LLC by filing a certificate of formation with special language authorizing the creation of one or more subsidiary LLCs. Then, you can go on to create two subsidiary LLCs that are owned by the parent LLC––one to purchase the condo and one to purchase the duplex.
Afterward, if someone sues you as a result of being injured in the duplex, only the LLC that owns the duplex will be liable and at risk. The parent LLC and the LLC that owns the condo, as well as, your personal assets will be insulated from the liabilities associated with the duplex.
This level of protection can only be achieved by utilizing a series LLC or by forming multiple LLCs. But, due to the cost and inefficiencies involved in setting up a separate LLC for each property you own, a series LLC would be a better solution.
The Advantages of a Series LLC Structure
There are two primary advantages to using a series LLC - limited liability and tax simplicity:
- Limited LiabilityIf you are operating multiple businesses or if you own one business with several different business operations, you might consider separating each business or business operation into its own LLC.The reason why you would want to do this is because then the liabilities of one business, or business operation, won't put the assets of the others at risk.For instance, if you operate three different businesses under one LLC, and one of the businesses gets sued, the assets of the other businesses in the LLC will also be liable for that lawsuit, because they are all under one LLC. But, by separating each business, you are also separating their assets and liabilities, to insulate each business from the debts and liabilities of the others.Then, if there is a lawsuit filed against one LLC, the assets of the other two LLCs, as well as, your personal assets will all be insulated against a judgment against the LLC that is being sued.
- Tax SimplicityIf you own multiple separate LLCs, you will need to file a tax return for each one. This can be somewhat cumbersome, especially if you own a lot of LLCs.However, if those LLCs are held in a series LLC structure, the profits and losses of each subsidiary LLC will pass through to the parent LLC, so you would only have to file one tax return for all of your LLCs.This is because subsidiary LLCs are typically single-member LLCs, meaning that they have only one owner - the parent LLC. Single-member LLCs are disregarded entities for tax purposes, which simply means that the income they earn is reported on the owner or parent company's income tax returns.Thus, a series LLC structure can provide the owner of multiple LLCs with a great deal of tax simplicity by avoiding the need to file multiple tax returns.
As you can see, a series LLC is tailor-made for certain types of business owners, especially real estate investors and those who own and operate multiple properties. If you're intrigued by the advantages offered by a series LLC structure, don't hesitate to reach out to us now via our contact form or by calling +1 (307) 683-0983. Our team of paralegals are available to provide assistance.
Frequently Asked Questions
Can an LLC own multiple LLCs?
An LLC can own multiple LLCs, this is no problem. It is commonly referred to as a parent-child setup or a holding company with subsidiaries. Generally, a unique subsidiary is formed for each revenue stream or asset.
Can an LLC own 50% of another LLC?
Yes, an LLC can own 50% of another LLC - it can also own 100% or 1%. This is referred to as a parent or holding company which is designed to invest in other companies.
Can one LLC fund another LLC?
One LLC can fund another LLC either via an equity investment or a loan. There are tax and asset protection considerations for each type of funding you should discuss with a business attorney.
Can an LLC DBA be another LLC?
An LLC can file a DBA to do business under a second, or third, etc., name, but the DBA is still considered part of the same LLC - it is not a second LLC.
FAQs
This question often comes up when business owners and planners are considering business structuring options. And the answer is yes. Limited liability companies can be parents and subsidiaries of one another, assuming all of the basic requirements of forming an LLC are met.
Can an LLC be the owner of another LLC? ›
As for the legality of ownership, an LLC is allowed to be an owner of another LLC. LLC owners are known as “members.” LLC laws don't place many restrictions on who can be an LLC member. LLC members can therefore be individuals or business entities such as corporations or other LLCs.
Can I run two different businesses under one LLC? ›
The answer is yes--it is possible and permissible to operate multiple businesses under one umbrella LLC. Many entrepreneurs who opt to do this use what is called a "Fictitious Name Statement" or a "DBA" (also known as a "Doing Business As") to operate an additional business under a different name.
Can one LLC give money to another LLC? ›
Yes, you can use funds from one LLC to pay for the operating expenses of the other. However, your tax and accounting purposes, it has to be documented between the entities, normally in the form of a loan.
Can an LLC be a manager of another LLC? ›
A manager may be a member but does not have to be. A manager may be another LLC or a corporation unless your state sets restrictions on the types of entities that may be managers of an LLC. Most LLCs are member-managed by default in most states. That is, no manager is selected and member management is assumed.
Can a single-member LLC have two owners? ›
For multi-member LLCs, each member will have an ownership stake. One of the main differences between these two structures is that two or more people cannot own a single-member LLC, unless you're married in a community property state, and a single person cannot own a multi-member LLC.
Why have an umbrella LLC? ›
An Umbrella LLC allows multiple business lines to work for one parent company, while also keeping finances discrete and sheltering each individual LLC or subsidiary from legal or compliance issues. This saves subsidiaries from expensive litigation costs and other expenses.
Do I need an EIN for my LLC? ›
An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN. An LLC applies for an EIN by filing Form SS-4, Application for Employer Identification Number.
What is a holding company LLC? ›
A holding company is a parent company — usually a corporation or LLC — that is created to buy and control the ownership interests of other companies. The companies that are owned or controlled by a corporation holding company or an LLC holding company are called its subsidiaries.
Can you have more than one LLC at the same address? ›
Yes, two LLCs can operate out of the same address. Keep in mind that customers searching for your business online may get confused seeing different business names at one address. Consider whether a unique virtual address may be a good move for your LLC.
Any owner of an LLC can be paid through profit distributions. Profit distributions are when the business profits get distributed among the members rather than reinvested into the business. These are sometimes called owner's draws.
Can two LLCs share a bank account? ›
As a result, the law requires you to open multiple business bank accounts for each separate business. You may try to use the same account - but it will be against the law.
Can I put personal money into my LLC? ›
Yes, you can use personal money to fund an LLC.
Why would an LLC own another LLC? ›
Reasons for an LLC Owning Another LLC
Management Control: Owners might want to manage new or different types of projects under separate LLCs while maintaining control under an umbrella entity. Tax Purposes: There could be tax benefits, depending on the specifics of how the LLCs are set up and taxed.
Am I the CEO of my LLC? ›
LLC leadership
If you have a single-member LLC, which means that you are the only member, you can choose any title you like to signify that you are in charge. You can name yourself the CEO and/or president, principal, managing partner, director of operations, or a similar term.
What is the highest position in an LLC? ›
Chief Executive Officer (CEO): Usually the highest ranking member of an organization, the LLC CEO has general management powers and dictates the company's vision.
What is a layered LLC? ›
You can start an LLC with any number of partners. Many LLCs can own a single-member LLC in the form of a multi-layered company. Most industries use this strategy, including pharmaceutical, real estate and branded retail products. You can start an LLC with as few or as many members as you want.
Can a single-member LLC be a holding company? ›
A single-member LLC may be a holding company and an LLC holding company may even be owned by a trust. This provides additional asset protection and may be used as the basis for an estate plan if so desired. Holding companies make managing disparate business interests easier and may act as a personal bank if needed.
Can my LLC have two names? ›
An LLC can have multiple DBAs. There is no legal limit to the number of DBAs an LLC can register. These “doing business as” names are not separate legal entities but are considered trading names used by the primary LLC. This allows an LLC to operate under multiple names while remaining a single legal entity.
Can you start an LLC with the same name as someone else? ›
You can't name your LLC something that's the same as or too similar to the name of an existing LLC already on file with your state and, in some cases, other states and internationally. Before filing your articles of organization for the LLC, check to see whether the name you want is available in your state.
