Can a Corporation Be a Member of an LLC?

by Tony Meier; Updated September 26, 2017
A corporation can become a member of an LLC

An individual or a corporation or other business entity can be an LLC member. Section 102 of the Revised Uniform Limited Liability Act states that a person can become a member of an LLC. Section 102 defines “person” to mean “an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

LLC Formation

One or more owners (members) can form a limited liability company. Limited liability companies are creations of state law. The LLC is formed when articles of organization (or whatever term the LLC law in that state uses for articles) are filed with the appropriate state agency.

Corporate LLC Members

Holding an LLC membership interest through a corporation adds an extra layer of liability protection. Corporate shareholders enjoy protection from liabilities of the corporation. The corporation uses the LLC to shield its other assets from its subsidiary’s obligations.

Tax Issues

Corporate LLC owners can utilize the pass-through federal tax treatment afforded to individual members. The single-member LLC will be a disregarded entity and two or more members will be a partnership for federal tax purposes. However, not all LLCs are classified as pass-through entities. Some of them elect S corporation status. Admitting a corporation as a member could destroy the LLC’s S status and have adverse tax consequences.

Uses

Corporations can use limited liability companies to own a subsidiary or a joint venture. In a joint venture, the other LLC members could be other corporations, individuals or partnerships.

About the Author

Based in Phoenix, Arizona, Tony Meier started writing in 1998. His first published article appeared in the “Arizona State Law Journal” while he was a law student. Meier is a member of the State Bar of Arizona. He holds a bachelor's degree in finance and a law degree from Arizona State University.

Photo Credits

  • incorporations articles image by Keith Frith from Fotolia.com