Can an LLC Own Another LLC?

By Jennifer Kiesewetter, J.D.

Can an LLC Own Another LLC?

By Jennifer Kiesewetter, J.D.

A limited liability company (LLC) can own another LLC—or multiple LLCs—through either a holding company or a series LLC. Generally, you can think of the relationship as one master LLC and one or more subsidiary LLCs. As with the establishment of single-member or multiple-member LLCs, state law governs the establishment of LLC holding companies and series LLCs. These structures aren't available in all states. Check with your state's LLC laws to see which structures are available to you.

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Let's explore each further.

Creating a Holding Company

Individuals, corporations, trusts, pension plans, and other LLCs qualify as owners, known as members, of an LLC. By allowing a master LLC to act as the holding LLC, the holding company doesn't actively participate in the business. It holds each subsidiary LLC, which in turn holds assets. This allows you to separate assets and minimize risk.

If you have more than one business requiring an LLC—for example, real estate companies or construction companies—you may want to use a holding structure. If you own several commercial buildings, you can place each building in a separate LLC within the primary holding company's structure.

If one of your commercial buildings underperforms or faces a lawsuit, it won't affect your other properties, as they exist as separately formed LLCs. Shielding your LLCs from one another protects each LLC's assets, debts, and liabilities.

However, the other LLCs could be liable in certain situations: if members acted negligently or the liability claim exceeds the individual LLC's insurance limits, for example. You must understand the ins and outs of asset protection when creating an LLC holding company.

Owning more than one company, whether individually or through a holding company, is time-consuming and complicated. You must form each LLC separately with your applicable Secretary of State. Each LLC needs to maintain its own records, bank accounts, employee records, and tax documents. Although the administration may still be burdensome, you have additional levels of limited liability with this structure: one level through the holding LLC and an extra level through the subsidiary LLC.

Creating a Series LLC

Only a handful of states and territories offer series LLCs: Alabama, the District of Columbia, Delaware, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Texas, Utah, Wisconsin, and Puerto Rico. A series LLC is similar to a holding company LLC in that it serves as an umbrella company, giving you flexibility and additional protections for multiple LLCs. However, it's easier to create and more efficient than a traditional holding company.

To set up a series LLC, you set up a master LLC, and in the articles of organization, you designate your business as a series formation. Then you draft an operating agreement to establish your additional LLCs, or the series. Once you establish the series LLC, you can create other series as needed. For certain states, you may need to file specific forms with the Secretary of State as well. However, you don't submit additional articles of formation for each series as you do for a holding company. Check your state laws to determine the specific requirements for establishing your series LLC.

Each series operates as a distinct LLC, with its own documents, bank accounts, and employee records. Each LLC holds its own assets and conducts its own business. Like the holding company, each series enjoys protection from liabilities incurred by other entities. The series LLC provides asset protection to the members of all LLCs and costs less than a holding company structure.

Series LLCs are still the new kids on the block when it comes to business formations. Thus, many unanswered questions still exist regarding these formations. You should consult with an attorney or use an online service provider to assist you in answering any questions you may have regarding which LLC structure is best for your situation. Doing so could save you time and money in the long run. By receiving additional guidance, you can proceed in organizing your businesses with confidence.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.