Can an S‑Corp Own a Delaware LLC?
Yes, with context. “S‑Corp” is a federal tax election for eligible corporations and, in certain cases, LLCs. An S‑elected corporation can own an LLC interest. Tax results depend on whether the LLC is single‑member (disregarded) or multi‑member (partnership) and on any elections made.
Why Structure It This Way?
- Segregation: Keep risk in a subsidiary while the S‑elected parent manages payroll and owners’ comp.
- Clarity: Distinct operations with intercompany agreements.
- Flexibility: Add partners at the LLC level without touching S‑status at the parent (mind eligibility rules).
Delaware Notes
- Form entities under Delaware law for governance flexibility and investor familiarity.
- Observe separateness: bank accounts, books, and authorizations.
- Confirm S‑eligibility (e.g., shareholders must be eligible persons, one class of stock).
Tax Outline
- Single‑member LLC owned by the S‑Corp is disregarded unless an election is made.
- Multi‑member LLC is generally a partnership; allocations follow the Operating Agreement.
- Compensation and payroll remain at the S‑Corp; consider reasonable salary rules.
General information only, not legal or tax advice.