LLC vs personal holding advantage/disadvantages?

Asked 12 months ago - Lafayette, IN

I am involved with a start up, and I personally have an LLC. Is there any advantage to my personally holding shares in the startup LLC vs. using my personally owned LLC as a holding entity?

Any advantages / disadvantages to holding things through an LLC?
Think any potential investors would have a problem with its members holding shares through LLCs?

Attorney answers (2)

  1. Jeff Ray Hawkins

    Contributor Level 7

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    Answered . I think of limited liability entities like containers of dangerous substances. If you store them too closely together, one may contaminate or destroy the other. The holding company idea makes sense, but I suggest a holding company that only serves as a holding company. My first advice to a business owner is to insure the business against liability with as much coverage as you can reasonably afford. Then, make sure every entity has its own bank account and accounting system that is completely separate from your personal accounts and records and the account and records of the other entities.. Keep annual minutes faithfully and file business entity reports with the Indiana Secretary of State on time all the time. Keep entity names distinct from each other so that people cannot confuse them. Do not commingle personal assets with business assets or the assets of one entity with another. If you must transfer assets among entities, document the transfers as sales or leases with documentation that you would expect to see in a conventional sale or lease business transaction between unrelated parties.

    The issue of investors raises a huge red flag about state and federal securities laws that exceed the scope of this forum. Consult with a reputable securities lawyer before communicating with any prospective investors in any way, whether in writing or in verbal conversation. Securities laws are very unforgiving. Violators are strictly liable for investor losses and attorney fees regardless of good intentions.

    This response does not constitute the formation of an attorney-client relationship. This response is intended for... more
  2. John P Corrigan

    Contributor Level 19

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    Lawyer agrees

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    Answered . Only advantages here if the key people allow it. You create an additional layer of liability protection for yourself by using your SMLLC. Beyond this basic advantage there are also other advantages that are well beyond what Avvo is intended for in terms of an extensive analaysis based on your personal situation and facts that are not known here. I regularly see LLC's with member's who are not natural persons so do not think it it be unusual...albeit the operating agreeent has to have extra clauses to ensure that change of control matters at entity level do not affect the underlying operating business.

    My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a... more

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