A limited liability company is an independent business entity that exists apart from its owners. There are no legal restrictions against another business owning an LLC. The Uniform Limited Liability Act, adopted in whole or in part in most states, allows any person to be an owner of an LLC. A person is defined as an individual or any other legal entity, such as a corporation, trust, estate or partnership. An S corporation, for instance, can spin off a product line into its own LLC, creating a subsidiary company where the S corporation is the sole owner.
Fit your business needs with the right LLC package
Decide in which state you will register the subsidiary LLC. An LLC can be formed under the laws of any state that is convenient to the parent corporation, or that offers the most favorable business climate. Go to the website of the state agency that handles business registrations, usually the secretary of state's office. This website will contain all of the information and resources needed to form a new LLC.
Conduct a name search in the state's business entity database to confirm the availability of the business name you plan to use. Every state requires a business to register under a name that is distinguishable from any other business operating in the state. There will be a link to the database on the main page of the business or corporations division of the state's website.
Engage a registered agent. All states require businesses to have a representative in the state that can accept service of process and other communications if the business is sued. Some states allow an owner of a business who has a physical presence in the state to serve as the LLC's registered agent. Some states allow the use of a commercial business that offers registered agent services for a fee. The website and the instructions to the articles of organization template will explain the state's requirements for registered agents.
Download the articles of organization template from the "forms and fees" section of the state website. This template is a state-approved, fill-in-the-blank PDF form that is provided for the convenience of new business owners. You don't have to use this form, but using it ensures that your filing will meet all of the state's legal requirements. Some states use an electronic system to register new LLCs. Access the system and fill out the articles template online, if that is the case.
Fill out the articles of organization template. The template will request basic information that satisfies the requirements of the law, including the name and address of the LLC, the name and address of the registered agent, and the name and addresses of the members, or owners, of the LLC. To indicate that the S corporation owns 100 percent of the LLC, list the S corporation as the sole member.
File the articles with the state. The filing will require a fee, and states usually accept paperwork by mail or in-person. Sometimes, the state will accept the filing by fax or by electronic submission. the instructions to the articles template will provide all the details. The LLC comes into existence on the date the state accepts the filing. It will be considered a subsidiary of the S corporation because the S corporation is listed as its sole member.