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Can a Corporation Own an LLC? Exploring Business Ownerships

Max Smith

Reading Time: 6 minutes

When you want an expansion of your corporation, you may think about LLC ownership. But really, can a corporation own an LLC?

Corporations and LLCs are two different business structures. You can find some similarities and dissimilarities between them. But if you get both ownership, you can enjoy some amazing benefits and opportunities to grow your business to the next level. 

Without further ado, let’s go down to see the ownership possibilities between the LLC and the corporation. 

If you are setting up your C Corp to run an LLC, yes, it is possible. There’s no restriction on a corporation buying an LLC share. In fact, S corporations and foreign corporations can also own an LLC.

C corporation is a formal business structure. Corporate tax rates apply to it. Like the LLC, a C corporation also offers liability limitation to its members. 

But it has a complex management and operation system. Directors operate a corporate management function.

However, a C corporation can legally own an LLC. It will help a C corp. to reap the benefits of having an LLC. But the question is, how can you hold an LLC? What can be the procedure?

Well, let’s find the answer below:

Find an LLC that is about to sell its ownership. You can find it using your contact information in the business forums and agencies. Also, watching Craigslist or maintaining personal connections is a good idea.
As a C corp owner, you can buy whole or a few shares of an LLC. You must see the LLC records and make further decisions on buying shares.

The business documents will change as the ownership changes. The primary documents of an LLC (Articles of Organization and Operating Agreement) will guide you in owning an LLC.
Notify all the related parties and federal states about the ownership change.

You must consult a service provider or lawyer to submit the legal documents properly. It will help you own an LLC according to your state’s rules.

Can a Subchapter S Corporation Own an LLC?

Yes! An S corporation can buy an LLC. It is legally possible. If you want more opportunities than an S corporation, you should own an LLC. So, you can buy an LLC to get extra benefits for your corporation and save you from difficult situations.

But why do you want to buy an LLC (Limited Liability Company) even though you have a corporation? Let’s figure out the reasons below.

Expanding Business

Are you launching a new business? You can start it with an LLC. You can buy an existing LLC or take down a new one under your S corp. It will help you to build a business with a different structure. Plus, it maintains the separation between your old and new ventures.

Assets Protection

Sometimes, S corporation faces legal or financial issues. At that moment, it can save its valuable assets using LLC tricks. 

LLC offers limited liability. Thus, the parent company subsidiary is an LLC to protect its assets from creditors.

Profits Distribution Flexibility

In an S corporation, profits are distributed according to the shareholder’s investment amount. However, in an LLC, profits are distributed based on factors, not on a monetary investment. 

In that case, if a member works hard or contributes to the manager, he will get more profit. S corporation can quickly get flexibility in profit distribution if it owns an LLC.

Management and Membership Flexibility

LLCs offer more flexibility in managing businesses and memberships. Unlike S corp., there are no member limitations. Members can independently discuss ownership percentages, profits, and management tasks.

Can an LLC Be Owned by a Foreign Corporation?

Of course, the owner of an LLC can be a foreign corporation. The USA permits any foreign corporation to own an LLC. 

The formation process is the same as for a US citizen. However, it must have an authorized person to handle the LLC tasks in the USA. You must follow some regulations if your foreign corporation has a single-member or multimember LLC. They can be:

1. EIN (Employer Identification Number)

Apply for an EIN on the IRS (Internal Revenue Service) website. It’s also called a federal tax number.

2. Filing Form 5472

Do you have any reportable transactions? Any discussion filings from the previous year’s transactions can create problems for you. 

So, fill out Form 5472 to avoid taxation troubles. In a multimember LLC, if your foreign corporation owns 25% or more shares, you must also submit Form 5472.

3. Maintaining Books

Make your LLC record books updated. You may need them to show to the IRS to support your 5472 form.

You must file forms for each LLC if your foreign corporation owns multiple LLCs in the US.

Can an LLC Own Shares in a Corporation?

An LLC can buy shares of a corporation only if it meets the criteria. It helps to expand your business or get into another company by buying stocks. 

Can an LLC Own a C Corp Share?

Yes. It’s easy for an LLC to own a C corporation. Whether it is a single or multimember LLC, it has the right to own an LLC.

Your LLC will enjoy ownership-changing ease. It will also make stock-selling profits and build legal standing as a corporation. Plus, your LLC will not bother with C-corporation limitations as it has its own LLC structure. 

The IRS will regard C corporations as corporate federal tax purposes. The dividends will pass to the LLC members, and they will also be taxed. But it will count as a member’s personal tax return. 

Your LLC can also take only the assets of a corporation, not the entity, to avoid tax complications. But your LLC cannot buy an S Corporation share until there’s a twist.

Can a Single-member LLC Own an S Corporation?

If your LLC is a single member or sole proprietorship, then it has the chance to own an S corporation. A single member will be considered a disregarded entity by the IRS. That is why it can own a S corporation. 

Plus, the LLC also needs to meet the eligible requirements to get a corporation share. But the multimember LLC cannot get shares or own an S corp. 

If your LLC owns an S corp, then it will enjoy tax benefits. The IRS will put corporate federal taxation on your S Corp, and then your LLC can save money on self-employment.

Owning an S corporation will help the owner receive cash dividends. Plus, it will provide a better option to distribute profit. 

Having ownership in an S corporation will also help with better taxation planning and reduction. The profits and losses will be transferred to the owner’s account. So, there will be no corporate tax charges. 

Conclusion

Hopefully, I described the possibilities under which a corporation can own an LLC. So, if you have a plan in mind to own an LLC, then go for it! 

But obviously, I recommend you analyze the documents and situation first and then get ownership for the best business future.

Frequently Asked Questions

Can an LLC become a subsidiary of a corporation?

Yes! A corporation becomes a holding company and takes an LLC under its ownership. So, the LLC becomes a subsidiary company. It’s a way to do joint ventures. As the corporation will have control over the LLC, it will influence the LLC’s profit distribution, taxation, assets, liabilities, and more.

Can a C corp own a single-member LLC?

Yes! A C corporation can own a single-member LLC to create joint ventures or expand the business. The LLCs will list all the expenses and revenues selected on corporation tax returns. LLC will become a division and provide its full ownership and control to C Corp.

Can a c corp own two LLCs?

Yes, a C corporation can own multiple LLCs. Each LLC is treated as a separate legal entity, and the specifics of ownership and control can vary. It’s advisable to consult with legal and financial professionals for guidance on the structure and implications.

Can you own an LLC and an S corporation at the same time?

 Yes, you can own both LLCs and S crops. It will give you combined benefits and opportunities to run your business. You can operate your business as an LLC, but you can enjoy tax benefits like an S corporation.

Max Smith - LLC Formation

He is a seasoned entrepreneur and legal expert at LLC Formation Hub. With a stellar track record in both business and law, Max simplifies the complexities of LLCs. His practical insights, featured on LLC Formation Hub, empower entrepreneurs across the USA. Max merges business finesse with legal acuity to guide businesses toward success.


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