Understanding LLC Ownership Structures
LLC owners are known as “members.” LLC laws don’t place many restrictions on who can be an LLC member. LLC members can therefore be individuals or business entities such as corporations or other LLCs. It is also possible to form a single-member LLC whose only owner is another LLC. Business owners who have several lines of business often form a parent LLC and subsidiaries to minimize their risks. Real estate investors and developers, movie studios, and other businesses that have multiple ventures with different risks frequently form parent and subsidiary LLCs.
The Advantages of an LLC Holding Structure
There are several benefits of an LLC owning another LLC. For example, it provides additional liability protection to the primary LLC, enabling business owners to run diversified businesses that don’t jeopardize each other.
- Limited Liability Protection. Members’ personal assets are protected from the debts and liabilities of the business. Since an LLC can be a member of another LLC, it can derive an additional layer of protection by virtue of its ownership. For example, you can own several apartment complexes in separate LLCs under a primary LLC.
What is it called when an LLC owns another LLC? An LLC may own multiple, single-member LLCs—this is called a holding company structure; or an LLC may serve as the master entity and own a series of LLC cells, should state statute offer this option.
Legal Requirements and Structures
Does Missouri require an operating agreement for an LLC? Yes, Missouri statute requires all limited liability companies to have an operating agreement.
Another option for running multiple businesses is to create individual LLCs for each of the businesses and then put them under one parent LLC that acts as a holding company.
On the other hand, series LLCs are designed to protect one unit of an organization by segregating its assets through a firewall shield.
An LLC is allowed to be an owner of another LLC. This would be what’s referred to as a holding company structure.
Starting one limited liability company just to hold another can get a bit confusing. But we’ll provide more information in later sections to figure out with this parent-subsidiary LLC structure is right for your business goals.
When your company’s primary business activity is investing, this is called setting up an LLC for investing. An LLC can invest in various assets — stocks, bonds, real estate, cryptocurrency, and other businesses. There are many reasons why people choose to form investment LLCs. It’s an excellent way to pool money from several informal investors — friends, family, or business partners.