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Should I Set Up an LLC Holding Company?

By IncNow | Published January 12, 2016
  • How you can protect your businesses from the liabilities of your other businesses
  • Does a D.B.A. offer you any legal protection?
  • Are there alternatives to setting up a separate LLC for each business or property?

houses on coin stacksDear IncNow,

Should I set up an LLC holding company for multiple LLCs or should I just use my current LLC and have DBAs for my separate businesses?

Dear Customer,

While it is advisable to set up a new LLC for each different business interest, if the cost of managing a dozen or more companies is beyond your economic ability, the Series LLC may be another alternative. Setting up a D.B.A. (“Doing Business As”) will not safeguard your personal assets from creditors of the business. You should form an LLC to limit your liability.

Introduced in 1996 in the State of Delaware, the Series LLC offers the benefits of a traditional LLC with one significant difference. A Series LLC can establish under that umbrella an unlimited number of self-contained “cells”. Under Delaware law, each sheltered cell is given some of the protections of separately incorporated subsidiaries.

For example, if you own multiple real estate investment properties, each property can be segregated into its own protected cell. A claim arising out of any one property should not allow that creditor or claimant to reach the assets of any other protected cell. If all properties were in a single traditional LLC, all would be at risk for a claim arising out of any one property. With a Series LLC, all of your eggs are still in one basket, but there is some separation between them, like in an egg carton to keep the eggs from breaking at once.

A Series LLC only pays one franchise tax fee and one registered agent fee no matter how many protected cells it creates. There is no cost to add protected cells or limit on the number of protected cells under the Series LLC. Because the LLC operating agreement is allowed maximum freedom of contract when drafting, the limit is your imagination.

Here’s a link to a video and more information about how you can use a Delaware Series LLC: https://www.incnow.com/delaware-series-llc/.

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When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go