You’re expanding your business and wondering if one LLC can own another. Maybe you want to launch a second venture, protect individual brands under a single umbrella, or build a structure that’s scalable and tax-efficient. The good news? Yes—an LLC can absolutely own another LLC. But as with most things in business law, the devil’s in the details.
This kind of arrangement is called a parent-subsidiary structure, and while it’s totally legal and often strategically smart, it comes with important legal, tax, and operational considerations. Whether you’re a solopreneur branching out or a seasoned business owner building an empire, understanding how LLCs can own other LLCs is a powerful step in business planning.
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Yes, One LLC Can Own Another LLC
There’s no legal restriction that prevents an LLC from owning another LLC. In fact, businesses do it all the time—especially when they want to:
- Limit liability between different ventures
- Operate separate brands under a single management team
- Isolate financial risk
- Simplify or centralize accounting and legal operations
In this structure, the owning LLC is referred to as the parent LLC, and the LLC it owns is the subsidiary LLC. The parent acts as a member (owner) of the subsidiary, just like an individual would.
Example: The Multi-Business Entrepreneur
Let’s say you run “Summit Holdings LLC,” and under that umbrella you want to operate three distinct businesses:
- “Summit Fitness LLC” – a chain of boutique gyms
- “Summit Cafe LLC” – a line of health food cafes
- “Summit Apparel LLC” – a workout clothing brand
Each subsidiary is owned by the parent company, Summit Holdings LLC. Each one is a separate legal entity but controlled by the same overarching owner.
Why Use a Parent-Subsidiary LLC Structure?
Creating multiple LLCs owned by a single parent company offers several advantages—particularly when it comes to risk management, branding, and scalability.
1. Liability Protection Between Businesses
If each business is its own LLC, the financial or legal trouble of one won’t drag down the others. For example:
- If “Summit Cafe LLC” is sued due to a food safety incident, “Summit Fitness LLC” is insulated from that lawsuit.
- Debts or obligations tied to one entity don’t automatically affect the others or the parent LLC (assuming proper separation is maintained).
This compartmentalization is often referred to as a “firewall” between business units.
2. Separate Branding, Unified Ownership
Each subsidiary can have its own name, brand identity, and even target audience, while the parent company owns them all. This gives you flexibility to build and market multiple businesses while keeping centralized ownership.
3. Easier Investment and Partnerships
If you want to bring on investors or partners for just one part of your business, a subsidiary structure makes this much simpler. You can:
- Sell ownership in “Summit Apparel LLC” without touching your gym or cafe business.
- Create joint ventures with outside companies on a per-subsidiary basis.
Investors love this setup because risk is more contained, and their money is tied to a specific business, not your entire operation.
4. Flexibility in Selling or Spinning Off Businesses
With subsidiaries, you can sell or dissolve one part of your business without affecting the rest. It’s much harder to do this if everything operates under one LLC.
How to Structure an LLC-Owned LLC
While the concept is simple, the setup needs to be done correctly to ensure the structure is legal, compliant, and functional.
Step 1: Form the Parent LLC
Create your main LLC (e.g., “Summit Holdings LLC”) in your state of choice. This entity will become the owner (member) of the subsidiary LLCs.
Step 2: Form the Subsidiary LLC(s)
When forming each subsidiary, list the parent LLC as the owner (instead of yourself personally). You’ll need:
- The Articles of Organization (naming the parent LLC as the member)
- A unique business name for each LLC
- A registered agent and business address (can be the same or different for each)
Step 3: Draft Operating Agreements
Each LLC—parent and subsidiaries—should have its own Operating Agreement. The parent’s agreement should explain that it owns and manages subsidiaries, and each subsidiary’s agreement should name the parent as its sole or majority member.
If there are multiple owners involved (for example, investors in one subsidiary), be clear about ownership percentages and responsibilities in each agreement.
Step 4: Maintain Corporate Formalities
To keep legal separation between entities, you must:
- Keep separate bank accounts and financial records for each LLC
- Use distinct EINs (Employer Identification Numbers) for each business
- Sign contracts under the correct business name
- Ensure each LLC has its own bookkeeping, tax filings, and compliance
Failing to do this can result in a court “piercing the corporate veil,” meaning the legal protections between LLCs could be ignored.
Tax Implications of LLC Parent-Subsidiary Structures
The IRS treats LLCs based on how they’re owned. That means a parent-subsidiary setup can result in different tax outcomes depending on your choices.
By Default:
- A single-member subsidiary (owned entirely by the parent LLC) is treated as a “disregarded entity.”
- The IRS sees it as part of the parent for tax purposes—no separate return is needed.
So, if you have “Summit Holdings LLC” owning 100% of “Summit Apparel LLC,” their finances can be reported together (if you choose to do so).
If the Subsidiary Has Multiple Owners:
- It’s treated as a partnership by default and must file a separate IRS Form 1065.
- If taxed as a corporation (C Corp or S Corp), it must file its own return.
You can also elect to have a single-member LLC taxed as a corporation by filing Form 8832. Talk to a CPA to decide what structure best minimizes your tax burden.
Potential Pitfalls to Avoid
While parent-subsidiary LLC structures offer flexibility, they also require discipline. Here are some common mistakes:
- Commingling finances: Mixing funds between LLCs weakens your liability protection.
- Improper ownership setup: Forgetting to name the parent LLC as owner during formation is a common oversight.
- Missing separate tax filings: If each LLC has different tax classifications, they may need separate filings—even if owned by the same parent.
- Neglecting compliance: Each LLC must meet state filing requirements, even if owned by another LLC.
When a Series LLC Might Be a Better Fit
Some states allow a special structure called a Series LLC. This is a single legal entity that creates internal “series” or “cells” for different business activities. Each series can have its own assets, liabilities, and operations—like subsidiaries—but without forming a separate LLC for each one.
Series LLCs can simplify formation and reduce costs, but they’re not recognized in every state and can be more complex from a legal standpoint. They’re worth exploring if you’re operating in a Series-friendly state like Texas, Delaware, Illinois, or Tennessee.
One LLC Owning Another Can Be Smart—If Done Right
Forming a parent-subsidiary LLC structure can be a savvy move for entrepreneurs managing multiple ventures. It gives you flexibility, branding freedom, and legal protection—while allowing you to scale without exposing everything to risk.
But it’s not a shortcut. Each LLC must be treated like a real, separate business. That means clear ownership documentation, separate finances, and strong legal agreements.
Whether you’re building a small group of businesses or laying the foundation for a larger enterprise, structuring your LLCs properly from the start can save you time, money, and stress in the future. And when in doubt? Don’t wing it—talk to a business attorney or CPA to make sure your foundation is solid.
