How do I put my LLC under a holding company?
Form the holding company with the same owners and ownership percentages as the existing LLC, then transfer the existing LLC interests to it—commonly through a Contribution Agreement. Update the subsidiary's operating agreement and applicable records so the holding company is correctly reflected as the member.
Understand the change
You are changing who owns the existing LLC.
Before the restructuring, you own the operating LLC directly. After the transfer, you own the holding company and the holding company owns the operating LLC.
The existing LLC generally remains the company that conducts business, signs contracts, receives revenue and pays operating expenses.
Before you begin
Check the issues that could affect the transfer.
Before forming or transferring anything, discuss the intended tax treatment with your CPA. If the existing LLC has a mortgage, important contracts, licenses or insurance, review any change-in-control, consent, notice or coverage issues. These questions do not prevent every restructuring, but they are easier to address before the ownership changes.
Step 1
Form the holding company LLC.
For many closely held holding companies, Wyoming is my preferred starting point because of its favorable LLC laws, privacy and comparatively low ongoing state cost. Delaware may be more appropriate when sophisticated investors or institutional expectations make its legal ecosystem important.
To minimize the risk of unintended tax consequences in a straightforward restructuring, the holding company should generally have the exact same owners and percentage ownership as the existing LLC. Confirm the intended tax treatment with your CPA before completing the transfer.
Form the holding company in Wyoming
See the Wyoming costs, filing steps, registered-agent requirement and complete video walkthrough.
Step 2
Transfer the membership interest to the holding company.
The current owner or owners commonly contribute their interests in the existing LLC through a Contribution Agreement. The holding company then becomes the member of the existing LLC, and the former direct owners become owners of the holding company.
Simply forming the new holding company does not create the parent–subsidiary relationship. The ownership transfer must actually be documented.
Step 3
Update the subsidiary LLC's operating agreement.
The existing LLC's operating agreement should identify the holding company as its member. Leaving the former individual ownership in the company records creates an avoidable inconsistency.
The purpose clause generally does not need to change merely because the ownership structure changed. The essential update is who owns the LLC.
Step 4
Review applicable state filings and annual reports.
Many formation documents do not identify the LLC's members, so an amendment may not be required. Requirements are state-specific, however. Review annual reports, licenses and other filings that request current ownership or management information.
Step 5
Complete the bank, insurance and CPA updates.
Provide the final ownership documents to the bank and establish a separate account for the holding company. Confirm with the insurance professional that the proper companies and individuals are covered. Give the restructuring documents to the CPA so future tax reporting reflects the correct ownership at each level.
The subsidiary generally continues receiving operating revenue and paying operating expenses. Contributions and distributions involving the holding company should follow a consistent, documented path.
See Chris's preferred LLC bank and video guide →Common problems
Avoid an incomplete restructuring.
- Forming the parent without transferring the LLC interest.The companies do not become parent and subsidiary merely because the new LLC was formed.
- Changing ownership percentages without advance analysis.A different economic arrangement can create tax, governance and transfer consequences.
- Leaving the old operating agreement unchanged.The subsidiary's records should identify the holding company as its member.
- Waiting until afterward to review lender or contract restrictions.Consent and notice questions are better addressed before implementation.
- Mixing funds between companies.Each entity should maintain its own account, records and documented transactions.
Common questions
Frequently asked questions
Can I move an existing LLC under a holding company?+
In many cases, yes. The usual approach is to form the holding company and then document the transfer of the membership interest in the existing LLC to it.
How do you transfer the LLC to the holding company?+
The existing owner or owners commonly contribute their membership interests through a written Contribution Agreement. The holding company then becomes the member of the existing LLC.
Does the existing LLC need a new name?+
Usually not. The principal change is the LLC's ownership, not its identity.
Does the LLC's purpose clause need to change?+
Usually not merely because the ownership structure changed. The important update is identifying the holding company as the member of the subsidiary.
Do the Articles of Organization need to be amended?+
Often the formation document does not identify the members, but requirements vary by state. Review the formation document, annual report and applicable licensing or ownership filings.
Should the holding company have a separate bank account?+
Generally, yes. The holding company and operating LLC should maintain distinct accounts and records.