Why Create an LLC Owned by an LLC?
A limited liability company can be owned by a person, a group of people, or even another LLC. That might seem nonsensical, but LLC-owned LLCs have some benefits:
What’s the benefit of an LLC-owned LLC?
There are two main reasons you might consider forming an LLC-owned LLC:
- Asset Protection – If your business has many different assets (like a real estate LLC) or has multiple high-risk components (like a construction company), creating several separate LLCs for each branch of your company might be helpful. These branches would all be owned by a Parent LLC, but each would also have its own liability protection.
- Privacy – In some cases, choosing to operate your LLC through another LLC may protect your personal privacy. For example, the state of Florida requires all LLCs to include member(s) name(s) in their Florida Articles of Organization—a public document. If your LLC is owned by another LLC, however, that member name would be the name of a company. Thus, you (the business owner) would remain anonymous.
Are there downsides to forming an LLC-owned LLC?
Yes: time and cost. Every time you form a new LLC—even if it isn’t an active business—you’ll have to abide by state statutes, which require formation documents and filing fees. You’ll also have to prepare annual reports and pay annual fees to keep each LLC in good standing with your state.
How do I form an LLC-owned LLC?
You can form an LLC-owned LLC the same way you would form a traditional LLC. Only instead of including the name of a person as your owner (or member), you would include the name of your parent LLC. For more information on forming an LLC, visit Northwest’s Start an LLC page.
