Can an LLC be Turned into a Holding Company?
One LLC can be organized as the parent holding company. The holding company owns controlling interests in operating subsidiary companies. Assets can be transferred from an operating company to a holding company by opening a bank account for the holding company, funding it, and transferring assets. An attorney has indicated legal consultation may be recommended to determine tax consequences of planned changes.
Common Holding Company Structure
The most common holding company structures are LLCs and corporations. The typical structure has a parent holding company owning assets of subsidiaries underneath it. For real estate, subsidiaries are often LLC investment properties.
Starting a Holding Company
To start a holding company, determine what industries to focus on. Consider if business goals are compatible with an LLC or if a corporation structure is needed. Implications on operations and taxes should be weighed before converting an LLC to a corporation. Single-member LLCs are taxed differently than multi-member LLCs. Multi-member LLCs can choose partnership or corporate tax status. With an LLC, updated ownership percentage paperwork may not be needed when admitting new members. However, an LLC can file paperwork to elect S Corporation or C Corporation tax status.
Key Points on Holding Companies
A holding company is a legal entity that owns controlling interests in other companies called subsidiaries. It helps protect subsidiaries’ assets and limit liability risks. Besides owning businesses, a holding company may also own stock, securities and real estate. To change entity from an LLC to a corporation, members must approve the change and create a conversion plan detailing how ownership converts into stock shares. After conversion, members become shareholders and transfer LLC’s assets and obligations to the corporation. Weighing benefits and steps involved in changing to a C Corporation from an LLC needs to be considered when deciding.
Can an LLC be a Personal Holding Company?
An LLC can be set up as a holding company. The holding company owns controlling interests in operating subsidiaries. Assets can be transferred to a holding company by funding it and transferring assets. Legal consultation may be recommended to determine tax consequences of changes.