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What are the benefits / disadvantages of creating a tiered LLC structure for two closely related business ?

Burnsville, MN |

I'm starting a photography business with a partner and we intend to form an LLC ( ABC LLC ) which will be taxed as a partnership and member managed . I already have another LLC ( XYZ LLC ) for photography endeavors conducted without my partner . In running two closely related business , I will have some expenses which are clearly for a specific LLC , but some could legitimately be attached to either LLC ( IE education ) . It is unknown which LLC will be more profitable , but both are start - ups . My accountant is suggesting to attach XYZ LLC as the member of ABC LLC , making XYZ LLC the parent .

Attorney Answers 3

  1. The benefits include an increased level of liability protection for you personally from the activities of ABC, LLC, and potential tax advantages or saving opportunities may exist. There are a lot of things to take into consideration when arranging businesses like this, so I would be beneficial to not only continue speaking with your tax specialist, but setting up a meeting with a business attorney would be very valuable. Many attorneys offer a free initial consultation, so take advantage!

  2. I agree with Mr. Warring.

    No attorney-client relationship is created as a result of this submission. The information and answer provided is of a general advisory nature based on the limited information provided and should not be constured as formal legal advise.

  3. As a parent-subsidiary relationship you will not get the same creditor protection benefits as if you keep them completely separate. If you keep them separate and one of them has a liability, the assets of the other may escape liability for the problems of the first one. The tax benefits are irrelevant if they are both taxes as flow-through entities.

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