Can a Limited Liability Company own other companies, i.e. be set up as what people often call a “holding company”?
An LLC is owned by its members. These members can be individuals or other business entities.
For example, an LLC can be owned by a single individual or multiple individuals. An LLC can be owned solely by a corporation or another LLC. Or an LLC can have multiple members with a combination of individuals and entities.
When an LLC is owned by another entity, the ownership structure of the LLC is often referred to as a “wholly owned subsidiary.” In many cases, the LLC that is the sole member of another entity (or entities) is often referred to as a “holding company.”
To create a subsidiary structure, the operating agreement of the subsidiary company would simply list the holding company entity as the member.
For example, if Acme Subsidiary LLC is formed and the sole member of that LLC is Acme Holding LLC, then the operating agreement of Acme Subsidiary LLC would list Acme Holding LLC as its member. The operating agreement of Acme Subsidiary LLC can indicate that Acme Holding LLC, as a member, manages the business of Acme Subsidiary LLC or the operating agreement could appoint managers to operate the business of Acme Subsidiary LLC.
Careful drafting of both the subsidiary LLC and the holding company LLC is required to effectively create an entity structure that is viable and appropriate for business entities.