Can an LLC Own Another LLC in the US?

For entrepreneurs managing multiple business lines in the US, one of the most common questions is: "Can one LLC own another LLC?"

The answer: Yes.

In the United States, an LLC can be owned by an individual, another LLC, or a corporation. This structure provides businesses with additional protection, flexibility, and professionalism. However, it also comes with additional administrative responsibilities and costs.

In this article, we'll explore the parent-subsidiary model, including its advantages, disadvantages, and a real-world example. This guide is especially useful for entrepreneurs looking to form an LLC and manage multiple business lines in the US.

Is the Parent LLC Structure Legal?

According to state laws, LLC members can be:

• Individuals,
• Corporations,
• Other LLCs,
• Or even someone living in another country.

Therefore, when an LLC's sole owner is another LLC, this is called a parent-subsidiary LLC structure. This structure is completely legal and widely used in the United States.

Why Would One LLC Own Another LLC?

The most important reason: To separate risks and avoid putting your entire business at stake in one place.

Entrepreneurs with multiple business lines can divide their operations into separate LLCs to:

• Prevent lawsuits in one business line from affecting the others,
• Make each subsidiary's financial and legal risks independent,
• Create a professional, scalable, and investor-ready corporate structure.

This model is particularly suitable for businesses with multiple revenue streams or those offering multiple brands, products, or services.

Example: A Business Structure with Three Divisions

Let's say you're an entrepreneur offering three different services in the US:

1. Consulting
2. Software (SaaS Product)
3. Education (Online Courses, Workshops)

These three business areas have completely different risk profiles.

Why Is Separating Risks Important?

1. Consulting LLC

• If advice you provide causes a client financial loss, you could face a lawsuit.
• Liability typically relates to service content and contract terms.

2. Software LLC (SaaS Product)

• Software bugs, data loss, data breaches,
• Disputes over licensing and terms of use,
• Subscription agreement violations can make this division high-risk.

This division typically carries the highest legal and technical risk.

3. Education LLC (Online Education)

• Refund processes,
• Content copyrights,
• Contracts with instructors and collaboration models are the main risks in this area.

Risks in this area are more operational and contract-based.

How Does the Parent-Subsidiary Structure Work?

• Parent Company (Parent LLC): Manages oversight, contracts, and asset ownership.
• Consulting LLC: Handles only consulting activities.
• Software LLC: Covers software development, licensing, and subscription sales.
• Education LLC: Manages educational content, course management, and seminars.

What Advantages Does This Structure Provide?

• A lawsuit filed due to a technical error in Software LLC only affects Software LLC.
• If there's a dispute on the education side, the consulting or software units aren't affected.
• A claim on the consulting side doesn't automatically put your software product and education business at risk.
• Each business line can be managed separately for investment, sale, partnership, or acquisition.

This model is frequently preferred by growth-oriented entrepreneurs, businesses with multiple revenue streams, startup owners, and digital service providers.

Disadvantages of the Parent-Subsidiary LLC Model

Like any powerful model, this one has some challenges:

1. Higher Costs

• Separate formation filing fees for each LLC,
• Separate annual reports (Annual Report / Franchise Tax) for each LLC,
• Separate BOI filings for each LLC,
• Separate banking and accounting for each LLC.

2. More Record-Keeping

• Each subsidiary must maintain its own records.
• Contracts, collections, and expenses must be managed in a more organized and systematic way.

3. Parent LLC Being Subject to Lawsuits

• If the parent company (Parent LLC) is sued, all its assets (including subsidiaries) could be at risk.

That's why it's important which contracts are signed under which LLC. If each LLC only handles transactions related to its own business, this risk is eliminated.

4. Personal Liability Doesn't Completely Disappear

In cases of personal negligence or loans signed with personal guarantees, individuals can still be held liable—this is a reality common to all structures.

The LLC structure provides a strong shield but doesn't offer absolute protection in every situation. If you're doing business in separate business lines simultaneously as described in the example, the advantages of this structure will likely outweigh the costs.

Why Use an LLC Instead of a Corporation?

Some entrepreneurs might wonder, "Can't I set up a parent-subsidiary structure with a corporation?" In theory, some combinations are possible, but in practice, an LLC is more advantageous in most cases.

Here's why:

• Corporations are generally subject to double taxation. Profits are taxed at the corporate level, and dividends distributed to shareholders are taxed again.
• Even with the S-Corp option, an S-Corp cannot be owned by another company.
• LLCs provide pass-through taxation, meaning profits flow directly to the owners' personal taxes. In other words, the company doesn't pay taxes—company profits (or losses) are distributed to the owners, who pay any tax liability on their individual tax returns.
• LLCs' flexible structures make them much better suited for the parent-subsidiary model.

For these reasons, the vast majority of entrepreneurs building multi-business models in the US prefer to use an LLC-based structure.

Conclusion: Is This Structure Right for You?

If you:

• Run multiple business lines,
• Want to separate risks from each other,
• Are targeting a more professional and scalable corporate structure,

the parent-subsidiary LLC model could be the right choice for you.

However, compared to a single LLC, this structure:

• Is more expensive,
• Requires more administrative work,
• Requires more organization and follow-up.

That's why it's important to evaluate your business model, risk level, and growth plans before making a decision.

If your business plan resembles the structure we described above, a well-designed parent-subsidiary model can help you protect your entire business in a more controlled way.