Who Can Own an LLC?
Limited liability companies are very flexible business entities, and this applies to ownership restrictions as well. The owners of an LLC are called members. A single member can own an LLC by him or herself, but a partnership of members, a group of members, or even a group of businesses can own an LLC. Limited liability companies are creatures of state law, which means every jurisdiction in the United States will have slightly different rules. The limitations on ownership, however, are fairly consistant across the country.
Single Member LLCs
An individual may own an LLC by him or herself. Unlike sole proprietorships, single-member LLCs offer liability protection. For this reason, it is often advantageous for a solo practitioner to form a single-member LLC. You do not need to live in the state in which you form your LLC, but you have to select someone who does live in the state to be the LLC’s registered agent. There are no age restrictions on LLC members, though single-member LLCs with an owner under 18 may have difficulties since minors are not legally able to enter into contracts.
Partnership LLCs or Group LLCs
Two or more people may own LLCs together with each individual being a member. Neither your financial investment nor the work you do for the LLC necessarily have to correspond to how much of the LLC you own. In this way, LLCs are unlike corporations. Rather, you may divide ownership in any way you and the members prefer. Ownership interest can change freely as new individuals become members or old members leave without disrupting the LLC’s status.
LLCs Owning Other LLCs
A business entity such as a corporation, LLC, or trust may own an LLC by itself or with other individuals or businesses. The members or owners of the parent companies typically govern the subsidiary LLC, though ownership interests may be divided in any way as with partnership or group LLCs. A business may wish to own a subsidiary LLC in order to divide assets or liabilities. Generally, the assets of the parent company will be shielded from the debts of a subsidiary LLC.
Special LLC Ownership Restrictions
There are few restrictions on LLC ownership, but some states have particular requirements for special types of LLCs. For instance, a few states offer what is called a professional LLC. In a professional LLC, all members must hold a professional license in the LLC’s specific business. Additionally, restrictions of any kind may be imposed on an LLC by the LLC’s own operating agreement. For instance, some closely held companies may have an operating agreement that specifies that only kin may be members.
Gentlemen,
I am a British citizen resident in the UK. I am shortly going to go live with several websites in the USA selling products for the US market (first website identified above, but not yet operational). I believe an LLC would be the right structure to hold the websites. I would like to hold the LLC’s via a Seychelles IBC. Can a US LLC with a foreign member be owned by a foreign business entity, ensuring the member is taxed in the US, and allowing the profits to be passed through to the IBC without witholding tax?
I’m not sure I completely understand your question, James. If you are asking if a foreign business entity can be a member of a US LLC, the answer is yes. As to taxes, the United States is very good at making sure that anyone residing in the US or making money from a US company owes the IRS taxes. If I understand you correctly and you will be residing in the US, you should be taxed in the US. As for withholdings, since the LLC is a pass-through tax entity, owners are not responsible for withholdings (assuming you have not elected to be taxed as an S-Corp).
I do not feel that I have enough information to give you competent legal advice. I encourage you to speak with an attorney on this matter. Good luck!
It’s a pity, I was hoping that an article with a name like “Who can own an LLC” would answer the question I have, but it just skims over it. What I really want to know is, why do the big 4 firms all run partnerships and not limited liability companies? Someone mentioned that auditors are not allowed to hide behind the corporate veil of an LLP, because people want them to feel personally accountable for the advice they give (even though we all know they work around it by hiding their personal assets in a trust anyway).
What I cannot find is “what piece of law” says a group of accountants or auditors cannot use a standard LLC. I’ve gone to the source and checked various bills/acts, even the professional bodies, but I cannot find anything that puts it in black and white saying “No, if you’re an accountant you can’t bill through a company.”
I’m not going to see an attorney to satisfy my curiousity, so I’d be grateful if you don’t suggest that.
Hi Angel,
I’m not sure exactly to what you’re referring when you talk about the “big 4 firms.” Assuming you’re referring to large accounting firms, there are four possible reasons I can think of why they might operate as a partnership rather than an LLC.
I’ll mention, too, that I’m talking purely about US law. I notice that you have a .co.uk email address, so if you’re referring to firms in the UK, I might be incorrect with my analysis.
Anyone over 18 can own an LLC in Florida.
A person from another country can own an LLC
This is how I got mine set up/
Trust 1 costed $750 to set up the trust to put my house, bank accounts and my companies under it so my name is not out there Then I created
1. Lutz Holdings LLC with the trust and my
attorey as MNG under it I put
2 Altha Farms LLC is owned by Lutz Holdings
LL
3. I have 4 mobile homes I rent out. Each one
I put as Altha Mobile home LLC 1threw 4
4. I put my cars, boat, tractors and farm
equipment in Lutz Equipment holdings LLC
I have been sued before for no fault of my of
my own. now they are going to have a hard time finding any assets that I have
Why would a university have an LLC?
There are a few different possible reasons, though it usually comes down to the preferences of the founding owners. Since educational institutions usually qualify for tax breaks (assuming they are accredited), many universities will register as nonprofit entities. For-profit universities with no accreditation body (like a few trade schools) may opt for the LLC entity if they are small or want simplicity in their filings.
If you are a Texas resident and you own a multi member LLC in Florida…which state taxes would apply…the state in which the LLC originated or the state in which the owners/members reside?
Members will typically pay income taxes in the state they live, but some states may levy taxes directly on the LLC. California is one such state, and I am not sure if Florida is as well. Check to see if Florida charges for something usually called a “franchise tax,” an “annual registration fee,” or a “renewal fee.”
I believe another California LLC can own more than 5% of another California (or foreign) LLC but someone told me that this is not true and that there is a 5% limit of an LLC owning another LLC. Could you please confirm this? Thank you in advance.
I’m not a California attorney so I cannot say with certainty, but I have not heard of any 5% limitation. I also could not find anything about a limitation from the California Franchise Tax Board or in the LLC statutes. I’m not sure what your friend may have been referring to, but as far as I know, there is no 5% limitation on ownership.
Why form a LLC? A friend has several LLCs. He created several LLCs in Florida and California. He created a LLC in California while living in Florida that now holds his mortgage in California while residing in Florida. He also has several LLCs in Florida even though he is no longer a resident but uses a local address. He also puts his wifes name on some LLCs without her knowing. Is this legal? Between California and Florida he probably has 8 LLCs. Is he trying to hide something or get a tax break?
There are legitimate reasons to have so many LLCs, and there are also illegitimate reasons. I don’t know enough about your friend to make any conclusion one way or the other. It is permissible to own an LLC that resides in a state that you do not.
I filed for an LLC in California two years ago. I never received any documents regarding my filing. However, when I search the state’s database my LLC information comes up as “active”. Shouldn’t I have some kind of legal document that states I am the LLC owner?
I’m not intimately familiar with the paperwork California will send, but I would expect that you should have received something in the mail. Nevertheless, this paperwork would rarely be required, and you can always order extra from the Secretary of State (if you need approved formation paperwork to take out a loan, for instance).
On a related subject of foreign ownership. I am currently working with 4 other people to structure an LLC. 3 of them are US citizens and 1 has a dual citizenship with US/Chinese.
We want to form a California or Nevada LLC with an investor/Investor group who are all Chinese.
Are there any restrictions on how much ownership that group can hold in a domestic LLC? And are there any filing issues or pitfalls we should consider.