A Limited Liability Company (LLC) is a form of business that provides personal asset protection to the owner and limited liability for incurred debts. LLCs also provide a flexible tax structure, as they are considered “disregarded entities” by the Internal Revenue Service, and all taxes pass through to the owner. Another great benefit to an LLC is that it can be set up with a single member--which can be a person or even another business entity. Setting up a subsidiary under an LLC is a matter of forming a new LLC under ownership of the parent company.
Decide on a name for the LLC subsidiary. It cannot be the same name as the parent company or conflict with any other names registered in your state. The government website for the state where the subsidiary will be organized will have a searchable database of existing names, often through the Secretary of State's office. Additionally, the name must end with the designation Limited Liability Company, LLC, L.L.C. or Ltd. Liability Co.
Fill out an Articles of Organization form for your state. The articles establish basic information about the new company, such as its name and purpose for being created. Instead of listing the name of the person who owns the parent company here, you will list the parent company as the owner of the new subsidiary. You can locate pre-formatted Articles of Organization on your state government website.
Assign a person or business entity to act as the registered agent for the subsidiary. This can be the same as the parent company. The only restrictions are that the registered agent must be able to accept legal documents on behalf of the business and have an actual physical address (not a P.O. box).
Mail or otherwise submit the Articles of Organization to your Secretary of State. Many states allow for online submission of pre-made forms. Be sure to include a filing fee for creating your new LLC subsidiary. This fee will vary by state.
When stating the purpose of the business, try to be as non-specific as possible. This will allow the business operating flexibility in the future. Many choose to write "for any legal purpose" on this section of the articles.
- When stating the purpose of the business, try to be as non-specific as possible. This will allow the business operating flexibility in the future. Many choose to write "for any legal purpose" on this section of the articles.
Judson Parker is a community organizer, business consultant and writer. He has directed campaigns for some of the largest charities in the United States. Parker holds a Bachelor of Science in sustainable enterprise management from the John Sperling School of Business at the University of Phoenix.