Can an LLC be a Holding Company for Subsidiary corporations?

Question

Hello all

I am a Real Estate Agent and studying for my Mortgage Broker license. I plan to create multiple service business related to Real Estate as c- corporations

I would like to form a Holding Company as the parent company over the businesses. Should the Holding company be LLC's or C-Corps?

Advantages or Disadvantages of either?

Nicholas Piva · Answer

Holding Company = no operations of their own.

Parent Company = has operations of their own.

Both can own subsidiaries. One has income/offers a service, the other does not.

Nicholas Piva · Answer

C-CORP is a bad idea. By electing for a C-CORP status, you will be taxed twice. My parent company is an LLC, and is taxed as an S-CORP. S-CORP eliminates double tax.

My setup is the following: S-CORP (holding/parent company) and it has 2 wholly-owned subsidiaries. This allows me to have 1 tax return (simple) with the Holding Company overall tax a congregation of the subsidiaries P/L.

Giedre Basov · Answer

I have just begun this so not sure how that works- I would check with the lawyer and accountant. But I think you can do business with holding company too.

Anthony Ezimoha · Answer

Oh ok thank you. So a Holding Company does not do any operations or offer services. But it is great for getting business funding or acquiring assests?

Like for instance, if you were at a Bank looking for funding, you would ask for your Holding company to receive the funding, not one of your subsidiary companies right?

Giedre Basov · Answer

The information provided is for IL - I do not know how it works in different states. I would check with the secrets of state In Delaware

Anthony Ezimoha · Answer

Wow I did not know that. I would want a Holding Company to be a variation of my name, like an encrypted version. Then have the subsidiary companies be pertaining to the business. Is this name rule only for Illinois?

I want to make businesses in Delaware

Giedre Basov · Answer

Yes that is what I was told by the Secretary of State when I called (in IL) My company that I started is Custom Design Homes LLC, (parent company) I’m in the process of forming the child company and it will be Custom Design Homes (for example) for rent LLC. By my understanding it will have its own protection and separate LLC. Also from what I have learned - the (S)LLC  you can apply for online and get that and EIN electronically. For the child company you need to download form and send it in - can’t do it online.

Anthony Ezimoha · Answer

@Giedre Basov

Thank you so much for the info. Really so the parent LLC must have the same name as the child LLC?

The subsidiary companies I want to form are in the same Real Estate field, but very different from each other. So say if the parent LLC is RedBank holdings, I would have to make the child LLCs like RedBank Realty, RedBank Electronics, RedBank Mortgages?

Do you have a separate EIN number for each LLC?

Giedre Basov · Answer

Hi. I’m a real estate agent and an investor starting out. After years of trying to decide how to go about the investor side of the business not long ago came across series llc and for me it sounded like the best option as you create the parent (holding ) llc and then can create separate (child) llc’s under it. One thing you should know is that the child llc must start with the name of parent llc see. So If parent llc is agent homes- the child llc would have to be agent homes and mortgages.  All this is new to me too but feel free to reach out with questions and I’ll help where I can.