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Who Would Create a Subsidiary Limited Liability Company?

A limited liability company (LLC) is a hybrid business organization that has the tax freedom of a partnership and the structural benefits of a corporation. Business partners associated with the company aren’t liable for any damages beyond the first investment made, so they can’t be sued. A business owner with multiple LLC companies may choose to create a subsidiary LLC. 

What is a Subsidiary LLC?

A subsidiary LLC is one or more separate LLC controlled by another company called a parent LLC. 

What is a Parent LLC?

A parent LLC is a company that owns specific stock in another business. This allows the company to control certain business operations in those LLCs. Significant ownership makes the company the “parent” company. All LLCs in the company’s control is considered a subsidiary, or second, company. 

Is There a Benefit to Creating a Subsidiary LLC?

Yes. Owners of multiple LLCs and diverse investments can spread the business assets various business entities. Also, this type of LLC decrease the risks of losing assets if sued. The parent LLC is shielded from any judgments. So any legal claim is limited to the specific LLC being sued. 

Do I Need to Select a Name for My Subsidiary LLC?

Yes. You want to select the name of the subsidiary that hasn’t been registered or used by another company. Each subsidiary you have must have LLC as part of the name. 

Do I Have to Complete Articles of Incorporation?

Yes. The articles of incorporation outline the goals and other information related to the company. 

What Do I Have to Do to Connect the Parent and Subsidiary LLC Together?

A business owner must draft an operating agreement outlining the business relationship between the parent and second company or companies. This will help to avoid any disputes that arise later regarding ownership and liability for debts. 

Do I Need an Attorney?

Yes. Contact a business lawyer to understand more about connecting two or more LLCs.

Photo of page author Taelonnda Sewell

, LegalMatch Legal Writer

Last Modified: 03-17-2016 05:25 PM PDT

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