How to Form Subsidiaries in an LLC

To form subsidiaries of an existing LLC, form new LLC's but list the current LLC as the owner/member of each new LLC.

Limited liability companies are popular business structures because they allow pass-through taxation (similar to partnerships) yet they protect the owner's personal assets, making the owners only liable for debts and obligations of the business to the extent of the owner's investment (similar to corporations). One LLC can be the parent company for other subsidiary LLCs. One reason to do this is to decentralize management; the subsidiary LLCs would be managed by its own team. Further, unprofitable subsidiaries could be sold off.

Instructions

1. Choose names for your subsidiary LLCs. Just like the name you chose for your current LLC, the subsidiary LLC names must comply with your applicable state rules (which generally require the name to contain an identifier such as "LLC" or "Limited Liability Company").

2. Draft an Articles of Organization for each subsidiary LLC. This form is available from your state's Corporation's Division; most states offer these forms over the Internet. When you formed your current LLC, you filed the Articles of Organization with your State's Business Corporations Division. Do the same for your LLC subsidiaries, however, in the "Members" portion of the form, list your current LLC as the owner/member. This will set up the parent/subsidiary structure for your current LLC and the ones you form as subsidiaries.

3. File the completed Articles of Organization with your state's Business Corporations Division and pay the required filing fee. The filing fee varies from state to state. Once filed, you will have formed subsidiaries for your current LLC.

References

• Law Jrank: Subsidiary Information
• Powe rHome Biz: Setting Up LLC as Parent Company with other Separate LLCs
• Reference for Business: Benefits of Subsidiary Companies