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Setting Up a Parent Company with Subsidiaries
- A parent company owns smaller companies called subsidiaries.
- Subsidiaries operate as extensions of the parent company.
- To create subsidiaries, form each one by filing documents listing the parent company as owner.
- Subsidiaries commonly structure as corporations or LLCs to limit liability and allow parent control.
- Parents must provide identities of directors and shareholders when registering a foreign subsidiary.
- Wholly-owned subsidiaries are fully owned by the parent.
LLC Under a Holding Company
- The holding company structure helps confine liability for each asset to the asset.
- One LLC is organized to serve as the parent holding company.
- An LLC holding company is taxed as a pass-through entity.
- Starting an LLC holding company includes choosing a registered agent and filing articles of organization with the state.
Requirements for a Subsidiary
- First, obtain authorization from the parent company’s board of directors or management to establish the subsidiary.
- Choose a suitable business structure, like a corporation or LLC, considering factors including liability protection and taxes.
- Complete necessary procedures to legally and regulatorily incorporate the subsidiary.
Acquiring or Creating Subsidiaries
- Acquire or create subsidiaries to become a parent LLC, qualifying it by possessing subsidiaries.
- A subsidiary operates independently regarding management, operations, finances, and legal structure but parental ownership and control.