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When does parent-subsidiary LLC setup make sense?

CrowCrow subscriber Posts: 2
edited May 2010 in Business Planning
Not sure what the difference is between the "Business planning" and "Grab Bag" categories, so I hope this is the right one.I currently have a New Hampshire sole proprietorship and I'm going to be starting a new business as an LLC.In the future I may have 2 or more LLCs. In addition to the new LLC, I may convert the sole proprietorship into an LLC or start other LLCs.When there are 2 or more LLCs in the picture, when might it make sense to have a parent LLC which the other LLCs are subsidiaries of? As opposed to just having several separate LLCs, not under a common parent.If there's no great benefit, I'd just as soon forego the extra expense and complexity. But if there'd be a significant advantage to it, I'm guessing it would be easiest to set it up that way now.If I were to just form the new LLC now and decide later that I'm going to have other LLCs and that for whatever reason it would make sense to have them all under a parent, how difficult is it likely to be to make the LLC I form now a subsidiary of a new parent LLC later?


  • CrowCrow subscriber Posts: 2
    Thanks for your reply.Yeah, I'm sorry, I know I asked a really general question. I was hoping there are some general guidelines I could go by to figure out if I even need to worry about setting up a structure like that right now.I) I really don't know what the financial structure of the individual LLCs will be, except to say that they'll be single-member LLCs that are probably just self-funded.II) I don't think any of the LLCs will be exposed to super high potential liabilities, but I would prefer the assets of each LLC to be segregated from liabilities of the others.III) Right now I'm contemplating single-member LLCs with no employees. For the current sole proprietorship that I may convert to an LLC in the future, I don't think I'd be taking a salary.The LLC that I want to form now is hopefully going to be a more passive source of income though. The idea is to invest in setting up an infrastructure (website) that can then generate recurring revenue with a minimum of ongoing work required on my part.So if that works out and it generates a certain amount of proceeds, I'd be interested if there was a legal tax strategy that allowed me to take some of the proceeds as a "reasonable salary" and the rest as profits not subject to SE tax. I think that would require me to elect S-Corp taxation.
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