A limited liability company, or LLC, is a type of business organization authorized by state statute. All state LLC statutes permit other types of business entities, such as a corporation or partnership, to serve as a member of an LLC, and usually place few restrictions on the ability of a corporation to be an LLC member.
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LLC Membership Requirements
Most states place few restrictions on the ability of a business or individual to serve as an LLC member. An LLC member must generally be of the age of majority, which is usually 18 years old. No state places any citizenship requirement on a corporation or individual wishing to serve as an LLC member. A corporation does not need to be incorporated in the same state as where the LLC is being organized.
Holding and Operating Companies
One common situation involving a corporation serving as the member of an LLC is when a business utilizes the structure of a holding and operating company. In this situation, the business owner creates two entities: a holding company and an operating company. The holding company owns all business assets, and leases them to the operating company, which utilizes the assets in operating a business. Typically, the holding company, which may be a corporation, would be a member of the operating company, which may be an LLC. A business owner may be able to further insulate business assets from creditors by using a holding and operating company structure and maintaining corporate formalities.
Professional LLC Requirements
While states generally do not impose many requirements on the membership of an LLC, states typically do regulate membership in a professional limited liability company, or PLLC. A PLLC is an LLC organized to provide professional services to the public, including medical, legal and accounting services. The members of a PLLC must generally be registered professionals in the field that the PLLC will be rendering services. Because the member of a PLLC must be a licensed practitioner in the field, a corporation cannot serve as the member of a PLLC.
Disclosure Requirements for Corporate Ownership of an LLC
The obligation of an LLC to disclose its membership varies by state. Some states do not require an LLC to disclose its members; other states require an LLC to disclose its managers, which would require disclosure of LLC members if the LLC is member-managed. Other states, such as Ohio, require disclosure of all LLC members with more than 5 percent ownership interest in the LLC. If a corporation that is a member of an LLC is required to disclose its membership, it must provide its name, physical address and percentage of ownership in the LLC.
References & Resources
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