Holding Company vs Series LLC: What’s the Difference?

Holding companies are business entities that are formed with the intent of owning another entity. Oftentimes holding companies are formed as a corporation or limited liability company (LLC). They do not make products or sell them, they do not even provide services. The entire existence of the company is to purchase and hold other companies.

This provides a lot of benefits including those with taxes, liability, and control. Similar to that of a holding company is a Series LLC. It is a type of limited liability company offering protection that sounds similar to a holding company. Despite this, there are some main differences to compare.

What is a Series LLC?

As compared to a standard LLC, a Series LLC is a limited liability company in which each “series” is its own separate entity. For example, these series will be separated to ensure legal liability. If a lawsuit is filed, then it will not affect the other Series. This is similar to a holding company and is often used in situations of real estate.

Series LLCs can also purchase and own items. This includes intellectual property and other items, such as real estate. In real estate, Series LLCs will be formed. Each property will be one series, to avoid liability between the various entities. For example, if a rental property is sued because someone is hurt on the property, or there is a tenant’s rights violation, it will not affect the other “Series”.

What is the Difference between a Holding Company vs Series LLC?

Although there are similarities between a Series LLC vs Holding Company, they are different. Holding companies are financial organizations. They control other companies by obtaining (through purchase) at least 51% of other companies. These companies are referred to as subsidiaries. Holding companies can hold LLC groups that are or own assets.

If the owner of the holding company wants to shelter an asset underneath the holding company, a new LLC would need to be formed. This is where it is comparable to a Series LLC, but not exactly the same.

For example, Series LLCs are easy to establish. As compared to creating multiple LLCs, a Series LLC is created through a master LLC and creating the Series off of it. By having a master LLC, it can handle business on its own and even generate revenue. Holding companies cannot do this, and simply act as a holding company shell. Master LLCs have more control of their business and operations and can push growth without compromising the operating agreement.

What are the Advantages of Starting a Series LLC?

One main advantage of a Series LLC is that it protects the assets of each Series individually. Additionally, assets that are within each Series LLC can be held in more than just that Series. They can also be held in the name of the main (master) LLC.

If liabilities occur, the other Series LLCs are protected. The same can be said should an issue arise with the master LLC, all the Series are independent of one another. If you are the manager of a Series LLC, you will need to ensure that each is actually separate. Costs and duties may be shared, but the bank accounts and any records of finances cannot be. This would cancel out the liability.

Whoever creates the master LLC has full freedom in creating the operating agreement. This will provide structure and also safety in the event of a lawsuit. It is also a lot easier than that of other company structures which can make business operation extremely quick and easy.

When to Start a Series LLC over a Holding Company

Both a Series LLC and a holding company have their place in the world of business. If you own multiple businesses then a series LLC is something that you might want to pursue. It provides liability protection and a method of organization.

If you run a small, single business, this may not be needed. If you run a small business then you, most likely, do not have multiple entities that require individual, limited liability protection. In this case, it would be unnecessary to start a Series LLC and would cost you more in formation costs than you would need to spend for protection.

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