Series LLC
A series LLC is a form of LLC structured to hold multiple interests or business lines under a single company. Each series is separated as its own LLC, providing liability protection. If one series has legal issues, other series are not impacted.
A series LLC consists of a parent LLC and divisions called "series" with separate assets, finances, purposes, and liability. The Illinois Secretary of State views a series LLC as one entity filing a single report and paying one fee. On August 16, 2005, the Series LLC Statute was added to Illinois’ Limited Liability Company Act, allowing series LLC formation. A federal employer identification number is typically needed for an Illinois series LLC.
Rather than separate entities, consider a series LLC to reduce overhead. Use it only if you run multiple businesses.
A series LLC provides personal liability protection, simplified administration and quick registration. Real estate investors use them so each series owns a property. It forms like a regular LLC but its articles state it can form series. The initial LLC is sometimes called master, base, umbrella or parent LLC. Its series are called cells, containers, divisions, subsidiaries or units.
Can a series LLC be a holding company?
If you can’t start a series LLC, or you don’t want to, a holding company is another option for multiple businesses. You create LLCs or corporations and an overall holding company that owns them. The holding company holds ownership and stock rights over your businesses — subsidiaries.
Holding Company
A holding company owns enough stock in another company to control its management. A holding company doesn’t produce goods or services itself. Holding companies allow owners to separate personal assets from operating businesses for tax-free dividends to flow to the holding company to be used later.
With a series LLC, a holding company can hold businesses under one umbrella while mitigating one business’ risk to others.
LLC vs Holding Company
An LLC can be set up as a holding company, but when it is, it will have no operation or function other than owning the other company and their assets. The difference between an LLC and a holding company is that a holding company doesn’t perform any sort of business on its own, whereas an LLC may run and manage multiple businesses.
A holding company offers asset protection, liability protection, and tax advantages. At first glance, a holding company and a series LLC are similar entities. While they do share similarities, there are important distinctions between them. Holding companies do not participate in their own operations. Instead, their purpose is to own interest in subsidiaries. When adding a subsidiary, a holding company must form a new LLC for each asset. With a series LLC, there is simply a master LLC with separate series.
The typical structure involves a parent holding company to hold subsidiary assets. LLC’s and corporations are widely used for holding companies. If one property gets sued, others avoid impact. Largest firms use holding companies to separate business lines. For example, Google and YouTube are Alphabet Inc subsidiaries.
A holding company offers owners asset protection and liability shielding by owning other enterprises. This structure may offer tax and operating advantages too. In the event of legal or financial troubles, the LLC still protects personal assets. Since the holding company holds the business’ majority assets, financial risks lower regarding debt tied to operating companies.