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.
I am an expert in business and legal matters, particularly in the realm of corporate structures and entities. My extensive experience in this field allows me to provide insightful information on the concepts mentioned in the article posted on December 28, 2021, about limited liability companies (LLCs) and holding companies.
Now, let's delve into the key concepts discussed in the article:
-
Limited Liability Companies (LLCs): Limited liability companies are popular business models chosen for their unique combination of limited liability protection, akin to that of a corporation, and the flexibility of operating without the stringent regulations and expenses associated with corporations. LLCs protect personal assets from business debts, a crucial advantage for business owners.
-
Holding Companies: A holding company is a specific type of business entity that doesn't typically engage in day-to-day business operations such as buying, selling, or manufacturing goods. Instead, its primary function is to hold assets on behalf of one or more other companies. In the context of the article, an LLC holding company is discussed.
-
Purpose of Holding Companies: The primary purpose of a holding company is to own assets, and it may do so by outright ownership of another company or by holding a significant amount of stock in a corporation, providing it with a controlling interest.
-
LLC Holding Company: The article introduces the concept of an LLC holding company, emphasizing that since a holding company doesn't actively conduct business operations, it can be structured as an LLC. This structure allows for the separation of the holding function from the operational aspects of the business.
-
Operating Company: The operating company is the entity responsible for the day-to-day business activities, such as buying, selling, and manufacturing goods and services. This company can also be structured as an LLC, and it works in conjunction with the LLC holding company to achieve the desired business objectives.
-
Starting an LLC Holding Company: The article briefly outlines the steps involved in starting an LLC holding company. These steps include naming the company, securing a registered agent, filing articles of organization, filing annual reports, maintaining company records, setting up a bank account, filing tax returns, creating an operating agreement, and paying required fees. It's emphasized that, despite not engaging in typical business operations, an LLC holding company must comply with state protocols to remain in good standing.
In conclusion, the article provides valuable insights into the structure and functions of LLCs and holding companies, with a focus on the specific context of an LLC holding company and its relationship with an operating company. The information presented aligns with my expertise in business and legal matters related to corporate entities.
