Holding Company Question

[Ben Foullon]

Hi everyone! 

I have an LLC and a friend of mine has an LLC. We formed a holding company where both of our LLCs are members. Are we able to transfer our funds to each other's LLC without worrying about taxes since they are both under the same parent company?

Thank you so much!

[Andy Krafft]

Ok and what is the holding company holding? 

Since each of your LLCs owns 50% of the holding company, but the holding company doesn’t own your individual LLCs, the IRS will likely treat your LLCs as separate, single-member LLCs for tax purposes. This means that any transfers of funds between your LLCs could have tax implications.

What is the context for transferring money back and forth? Is it for services that one LLC provides the other? Or simply to help the other LLC pay for expenses?