Limited liability companies (LLCs) are popular business models for their ability to offer limited liability protections like a corporation, but without corporate regulations and expenses. While LLCs can protect personal assets from business debts, they can leave business assets vulnerable. This is where the idea of an LLC holding company comes in.
What is a holding company?
A holding company is a business entity that doesn’t typically do business—like buying, selling, or manufacturing goods. Its purpose is simply to hold assets on behalf of another company, or several other companies. This could mean that an LLC holding company owns another company outright, or owns enough stock in a corporation to hold a controlling interest.
Can a holding company be an LLC?
Yes. Since a “holding LLC” wouldn’t actually do business, it would most likely be paired with what’s known as an “operating company.” The operating company is the business entity responsible for the buying, selling and/or manufacturing of goods and services. It can also be an LLC.
How do I start an LLC holding company?
You can create an LLC holding company in much the same way you would create a traditional LLC. Depending on the state you’re in, you’ll be required to:
- Name your company
- Secure a registered agent
- File articles of organization
- File annual reports
- Maintain company records
- Set-up a bank account
- File tax returns
- Create an operating agreement
- Pay required fees
Even though an LLC holding company doesn’t “do business” the way an operating LLC would, it still needs to follow all state protocols in order to remain in good standing.