Can an LLC own a 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 company where the operations and business occurs, including where the employees and liabilities are, is referred to as the operating company.

How do I set up a holding company for multiple LLCs?

Create an LLC Holding Company With Individual LLCs Under It. Another option for running multiple businesses is to create individual LLCs for each of the businesses and then put them under one parent LLC that acts as a holding company.

What does a real estate holding company mean?

A real estate holding company is a legal entity designed to protect business owners from the risks that come with owning investment properties. Real estate holding companies, also known as limited liability companies (or LLCs), do not participate in business operations themselves but own different assets.

When to form a real estate holding company?

You want to purchase a property, but don’t want to expose the operating company to the potential liability risks. To protect Hammers and Nails, Inc., you form a real estate holding company, named “Hardware House, LLC” and purchase the property in the name of that entity.

How is a real estate holding company different from a partnership?

In forming an LLC, you are not only subjected to fewer taxes, but you are awarded more deductions. Real estate companies owned by more than one person, however, are viewed differently in the eyes of the IRS. Otherwise known as “multimember” LLCs, these business entities are taxed similar to that of a partnership.

What are the tax benefits of a real estate holding company?

As the owner of a real estate holding company, single-member or multimember, you are entitled to pass-through taxation benefits. Again, all of these tax benefits are in addition to the liability protection shield that was previously discussed.

How does a LLC work as a holding company?

One LLC is organized to serve as the parent holding company. The business owners hold all interests in the parent LLC. Separate subsidiary LLCs are formed to hold title to each high-risk asset (such as rental property) or business line. The parent holding company owns the subsidiary LLCs. High-risk assets are transferred into the subsidiary LLCs.