Can a Delaware LLC Own Another LLC?
Yes. A Delaware LLC may own interests in another LLC, whether the subsidiary is formed in Delaware or another state. This parent–subsidiary structure is common for separation of liability, accounting clarity, and scaling multiple lines of business.
Why Use a Parent–Subsidiary Structure?
- Risk isolation: Operating risk remains in the subsidiary while valuable assets stay upstream.
- Clarity: Separate books, bank accounts, and governance per entity simplify compliance.
- Flexibility: Bring on partners or investors at the subsidiary level without affecting the parent.
Tax Treatment
A single‑member LLC owned by a Delaware LLC is typically a disregarded entity for federal tax purposes (unless an election is made). Multi‑member LLCs are generally taxed as partnerships by default. Delaware entity law is flexible; your tax outcome depends on elections and where business is conducted. Coordinate with a CPA familiar with Delaware.
How to Set It Up
- Form the parent Delaware LLC and adopt an Operating Agreement authorizing ownership of subsidiaries.
- Form the subsidiary (DE or other state). Name the parent as the member.
- Open separate bank accounts; maintain independent books and records.
- Execute intercompany agreements (IP license, services, leases) as needed.
Foreign Qualification
If the subsidiary operates outside Delaware, it may need to foreign‑qualify in those states. Likewise, if a Delaware parent has employees or operations elsewhere, separate compliance may apply. Keep registered agents current in each jurisdiction.
Best Practices
- Document capital contributions and intercompany transfers.
- Respect separateness: no commingling of funds or assets.
- Keep minutes/consents for material transactions between parent and subsidiary.
General information only, not legal or tax advice.