Last updated: September 16, 2022

There are a lot of questions that business owners have when it comes to forming an LLC. One common question is whether or not an LLC or limited liability company can own another LLC.

The answer is yes - parent LLCs and subsidiary LLCs are both valid business entities. This article will discuss the benefits of owning a parent LLC and how it can help your business grow.

What Types of Business Entities Can an LLC Own?

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An LLC can own any business entity, including other LLCs, corporations, and partnerships. This allows business owners to keep their businesses separate and organized.

For example, a business owner could have an LLC that owns a restaurant and another LLC that owns a clothing store. This helps protect the assets of each business in case of bankruptcy or litigation.

Additionally, LLCs can own real estate and other assets. This gives business owners more flexibility when it comes to their business ventures.

Multiple businesses can be run out of a single LLC, which can save on taxes and administrative costs.

Benefits of an LLC Owning Another LLC

There are several benefits of an LLC owning another LLC. One of the most important is asset protection.

As we mentioned earlier, if one of the businesses owned by the LLC where to go bankrupt or experience a lawsuit, the other businesses would be protected.

This is because each company is its own legal entity and has its own assets.

Another benefit of an LLC owning another LLC is tax efficiency. When a parent company owns businesses, they can be taxed as a single entity. This saves on taxes and makes filing taxes simpler.

Finally, an LLC owning another LLC can help with business growth. By having multiple businesses under one umbrella, business owners can more easily expand their operations. This can be especially helpful if the businesses are in different states or countries.

How Does One LLC Own Another?

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There are a few different ways that an LLC can own another LLC. Let's look at the parent-subsidiary LLC structure and the holding company structure.

The parent-subsidiary LLC structure is popular because it is simple and easy to set up. It also provides asset protection and tax efficiency for the parent company.

However, it is important to note that the subsidiary company is not a separate legal entity from the parent LLC. This means that the parent company is responsible for the actions of the subsidiary company.

Another way to structure an LLC owning another LLC is through an LLC holding company. A holding company is a separate entity that owns all or part of one or more other businesses.

This allows the parent company to have more control over the subsidiary companies and provides asset protection and tax efficiency.

The holding company structure is more complex than the parent-subsidiary LLC structure. It also requires more paperwork and administrative work. However, it offers more flexibility and can be used in a variety of situations.

These structures are valid ways for an LLC to own another LLC. Ultimately, the decision about which structure to use depends on the needs of your business. If you're not sure which structure is right for you, consult with an attorney or accountant.

How Does a Parent LLC Protect Its Subsidiaries?

When a business is formed as an LLC, the owners of that LLC are referred to as LLC members. Members can be individuals, other businesses, or other LLCs.

An LLC can own another LLC, and this is known as a subsidiary. The parent company (the first LLC) protects its subsidiaries by setting up separate bank accounts for them and keeping the finances of each LLC separate.

The members of the subsidiary LLCs are not liable for the debts or obligations of the parent company. This protection is especially important if the subsidiaries are in different states than the parent company. In some cases, a business may be formed as an LLC but will operate as a subsidiary of a larger company.

This can be advantageous for the smaller LLC because it allows them to take advantage of the larger company's name, reputation, and resources. However, it is important to remember that the subsidiary LLC is still its own entity and should maintain separate records and finances.

If you are considering setting up a subsidiary LLC, be sure to consult with an attorney to make sure you are taking all the necessary steps to protect your business.

Are There Any Drawbacks to Owning a Parent LLC?

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There are a few drawbacks to owning an LLC parent company:

  • It can be more costly to set up and maintain than a standalone LLC.
  • Parent LLCs have stricter filing requirements than subsidiary LLCs.
  • It can be more challenging to raise capital for a business owned by this LLC.

Despite these drawbacks, the benefits of owning a parent LLC typically outweigh the costs. If you are thinking about starting a business, or if your business is expanding, you should consider forming a parent LLC. This can help protect your business and help it grow.

FAQs

Can You Have Two Businesses Under EIN?

No, you cannot use the same EIN for multiple businesses. An EIN is used to identify a business for tax purposes, and each business needs its own EIN. You can obtain an EIN by applying online at the IRS website.

Can Two LLCs Have the Same Dba?

Some states will not allow two businesses to use the same DBA. In other words, it's important to check with your state's business registry to see if there are any restrictions on using the same DBA. If there are restrictions, you may need to choose a different name for your second LLC.

Can an LLC Own Multiple LLCs?

Yes, an LLC can own multiple LLCs. The company is a separate legal entity from its owners and shareholders, so it can own other companies just like any individual or corporation can.

There are a few restrictions on the number of LLCs that an individual can own (depending on the state), but there are no limits on how many LLCs a company can own.

Can an LLC Own Another LLC? (Final Thoughts)

In conclusion,  it is possible for an LLC to own another company. The process of setting up is  relatively simple, and it can offer a variety of benefits to businesses.

There are a few drawbacks to owning an LLC parent company, but these typically outweigh the costs. If you are thinking about starting or expanding your business, you should consider forming a parent LLC. This can help protect your business and help it grow.

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